Debate ensues over policy mix

 Renowned economist and Press Corporation Limited plc group chief executive officer Ronald Mangani says the adoption of a more realistic economic management framework could be beneficial to catalyse the country’s growth.

In his paper published in the African Review of Economics and Finance titled ‘Smooth transitioning growth in Malawi: The role of economic policy, he argues that neoliberalism, an economic philosophy that emphasises the role of free markets and minimal government intervention, has not worked for Malawi for the past four decades.

 Mangani, who is also an academic with a doctorate in economics, says the current economic policy regime has failed to proffer credible solutions to the problem of the country’s slow economic growth.

He suggests that Malawi requires a combination of fiscal discipline and strategic

 government intervention, exchange rate management, tariff protection and export promotion as well as public sector investment in both enterprises and traditional social goods.

Says Mangani: “The liberalisation of the financial market assumes the existence of a fiscally sound government and a strong regulator, both of which are necessary conditions for ensuring that financial resources are directed to productive use.

“Instead, a fiscally weak government overburdened by growing demands for delivering public goods and services, combined with recourse to mere moral suasion as the sole means of regulating financial intermediation.”

Mangani says without an institutional framework that guarantees the functioning of a market economy, liberal policies transfer economic rents from  public to private enterprises that have limited regard for sustainable economic growth considerations.

According to the paper, Malawi has experimented three main policy regimes; pre-1981 which focused on Keynesian demand management, developmental State theories and protectionist policies; 1981 to 2004, the country implemented neoliberal economic policies and between 2004 and 2012briefly departed from neoliberalism with expansionary policies and then reverted back.

However, Malawi’s real gross domestic product (GDP) growth did not exhibit a transition until after 2004, indicating minimal impact from neoliberal policies adopted in 1981, according to Mangani.

Commenting on the paper yesterday, Scotland-based economist Velli Nyorongo observed that inconsistent and slow policy implementation hinder long-term economic growth, saying there is need for fully committed reforms tailored to Malawi’s specific circumstances.

“A ‘one-size-fits-all’ approach simply is not effective. Moving forward, the country should not blindly accept economic prescriptions from development partners, but rather evaluate what works best for Malawi’s context,” he said.

Economic commentator Frederick Changaya observed that what is key is the choice of policies and policy mix that can be ideal for a country such as Malawi.

“My analysis shows that we err on the choice of policies, their timing and intensity. We also err on policy mix between trade, fiscal and monetary. In many cases these policies and their instruments are not in sync,” he said.

Economist Gilbert Kachamba said a change in economic policy could potentially improve Malawi’s fortunes if it addresses the shortcomings of past approaches.

Economics Associaton of Malawi acting president Bertha Bangara Chikadza suggested that a successful transformation requires strategic planning.