The International Monetary Fund (IMF) says governments across the world can strengthen public support for challenging reforms by investing in social protection programmes.
The global lender said this is despite concerns about the sustainability of such measures in resource constrained economies such as Malawi.
In its latest Regional Economic Outlook for Sub-Saharan Africa, the IMF highlights the importance of inclusive engagement with citizens and stakeholders for governments implementing policy reforms.
The IMF suggests that this approach could foster a sense of public ownership and help to counter misconceptions and building stronger support for reform initiatives.
Additionally, the IMF report recommends sequencing reforms carefully to delay non-essential adjustments while prioritising those with immediate benefits.
Reads the report in part: “Appropriately designed and well-targeted policies to support those most affected by reforms can help overcome resistance to reform by mitigating potential social costs.”
These recommendations follow widespread public resistance to structural reforms recently implemented as part of the four-year $175 million Extended Credit Facility (ECF) agreement signed in November last year.
The Malawi Government’s decision to increase taxes on second-hand vehicles and clothing sparked protests, leading to a reversal of the decisions
An Afrobarometer survey cited in the IMF’s report reveals that over 68 percent of Malawians believe the government should use tax revenue to cushion citizens from economic shocks, a significantly higher figure than the 51 percent average across 34 other African nations included in the survey.
Scotland-based Malawian economist Velli Nyirongo agrees that increased government funding for social protection programmes could provide short-term relief to vulnerable populations but warns that this approach could strain government finances.
He said: “Without increased revenue or spending cuts in other areas, this approach could lead to significant fiscal strain. Increased borrowing may become necessary, potentially diverting resources from critical infrastructure and development projects.”
Nyirongo urged the government to incorporate strategies that equip beneficiaries with skills, resources and opportunities for sustained economic independence.
In an earlier interview, Economics Associaiton of Malawi acting president Bertha Bangara-Chikadza encouraged the government to improve tax collection efficiency to relieve budget pressures.
The 2024/25 National Budget estimates recurrent expenditures at K4.21 trillion, accounting for roughly 92 percent of total projected revenues of K4.55 trillion.
The expenditures also exceed the projected domestic revenue of K3.38 trillion, creating a fiscal deficit of K1.43 trillion, or 7.6 percent of gross domestic product (GDP) and 23.91 percent of total expenditures.
