Malawi’s shift towards expansionary fiscal policy has attracted mixed views as government moves to stimulate growth even as foreign exchange reserves shrink and the kwacha continues to be volatile.
The mixed views follow what Secretary to the Treasury Betchani Tchereni earlier said that the lapse of the four-year International Monetary Fund (IMF) $175 million (about K306 billion) Extended Credit Facility (ECF) was a deliberate move to pursue growth-oriented policies.
system will make things worse. | Nation
He said: “The ECF focused on stabilisation when Malawians needed jobs, food and medicine. Now that it has lapsed, we can explore an expansionary stance focused on industrialisation, mega farming and mining.”
But economists said in separate interviews on Monday that they are cautiously supportive of a targeted growth drive, but warn that it must be anchored on fiscal discipline and structural reform.
Economic governance expert Anthony Mukumbwa said an interview on Monday that the shift points to deeper structural problems, adding that there is need to deal with foreign exchange leakages and corruption.
“Forex is leaking through informal platforms and luxury imports. Until these gaps are closed, pumping more money into the system will only make things worse,” he said.
Economics Association of Malawi president Bertha Bangara-Chikadza said an expansionary fiscal policy can be justified in a stagnant economy.
“But not when inflation is high and reserves are this low. Without disciplined controls and stronger revenue mobilisation, stimulus risks fuelling further instability,” she said.
In a separate interview, development economist Fredrick Changaya said the IMF’s previous focus on austerity worsened inequality, adding that the shift towards pro-growth policy presents an opportunity to reset fiscal priorities.
“Many low-income Malawians were worse off under the ECF. This is not a time to collapse, it is a time for renewal,” he said.
Changaya urged the government to pursue progressive taxation, strengthen mineral royalties and consolidate social protection.
In its Article IV consultation statement released last week, IMF warned that Malawi’s economic outlook remains fragile.
The global lender said growth slowed to 1.8 percent in 2024, over 20 percent of the population now faces food insecurity and inflation, expected to average 29 percent this year, is elevated.
The fund urged the government to tighten fiscal and monetary policies and unify exchange rates.
The kwacha remains officially stable at K1 751 against the dollar, but data from the central bank shows the local unit is steadily depreciating against the pound, euro and rand, reflecting underlying pressures.
