Economics Association of Malawi (Ecama) says Malawi is a heavily subsidised economy and this has derailed the country from making economic progress.
For Malawi to make sustainable economic progress, Ecama argued that there is need for government to start making adjustments by removing the subsidies, which are eating much into government revenue.
Speaking during the Reserve Bank of Malawi (RBM) Fourth Monetary Policy Technical Forum in Blantyre on Wednesday, Ecama executive director Frank Chikuta observed that at the pace Malawi is moving, removing the subsidies at a later stage would clamp down the economy.
He said: “In Malawi, we have subsidised fuel, education, exchange rate, fertiliser, government services, passports and hospitals, among others.
“But at this pace, we will have to do significant adjustments if we are to move forward.”
A Weekend Nation analysis on the Farm Input Subsidy Programme (Fisp) from 2005 to 2019 and its successor, the Affordable Inputs Programme (AIP) introduced in 2020 to improve food security among the ultra-poor, and statistics from the Department of Disaster Management Affairs (Dodma) showed that K900 billion or 69 percent of the total agriculture budget in subsidies did not reduce the money government has been spending to feed the hungry.
According to the analysis, in the past 17 years the subsidies have been operational to eradicate hunger among the ultra-poor, government spent an additional K500 billion to feed them in the past 10 years.
RBM director of economic policy and research Kisu Simwaka conceded at the forum that subsidies are not bringing intended benefits to the economy.
He said this is because most of the resources are channelled towards consumption and that targeting of the beneficiaries can sometimes be off-target.
Said Simwaka: “If we look at our economy, you will see that we are driven by consumption. Where is our money going?
“We are in the business of consuming. We are all to blame. We are doing wrong things and getting wrong results; hence, the rising debt now at K9.4 trillion while our domestic revenues in the budget is pegged at K2.4 trillion.”
He said that of the total private sector credit, about 60 percent goes to governement out of which 80 percent is for consumption.