UN calls for stronger fiscal measures
The United Nations (UN) World Economic Situation and Prospects has called for the re-allocation and reprioritisation of public expenditures through direct policy interventions that will create jobs and reinvigorate growth for developing economies, including Malawi.
In a statement on the launch of the United Nations World Economic Situation and Prospects 2023, the UN said this will require strengthening of social protection systems, ensuring continued support through targeted and temporary subsidies, cash transfers, and discounts on utility bills, which can be complemented with reductions in consumption taxes or custom duties.
In an accompanying statement to the report on Wednesday, United Nations Secretary-General António Guterres said these unprecedented times demand unprecedented action.
He said: “This is not the time for short-term thinking or knee-jerk fiscal austerity that exacerbates inequality, increases suffering and could put the SDGs farther out of reach.
“This action includes a transformative SDG stimulus package, generated through the collective and concerted efforts of all stakeholders.”
Amid high inflation, aggressive monetary tightening and heightened uncertainties, the current downturn has slowed the pace of economic recovery from the Covid-19 crisis, threatening several countries, both developed and developing, with the prospects of recession in 2023.
A series of severe and mutually reinforcing shocks, the Covid-19 pandemic, the war in Ukraine and resulting food and energy crises, surging inflation, debt tightening, as well as the climate emergency, battered the world economy in 2022.
The report has since presented a gloomy and an uncertain economic outlook for the near-term with global growth forecasted to moderately pick up to 2.7 percent in 2024 as some of the headwinds will begin to subside.
However, this is highly dependent on the pace and sequence of further monetary tightening, the course and consequences of the war in Ukraine, and the possibility of further supply-chain disruptions.
Minister of Finance and Economic Affairs Sosten Gwengwe is on record as saying in the 2023/24 fiscal plan, that Treasury will focus on targeting quick wins, especially in the economic sectors that can generate wealth, create jobs, while at the same time entrenching food security.
He said since the budget remains an important tool in fostering economic prosperity and eradicating poverty, especially in times like these when the economy is experiencing various external challenges, it is important that inputs to the budget should look beyond elections, but rather, to the Malawi 2063 Agenda.
Presently, Gwengwe said 97 percent of the budget resources go towards statutory expenses, leaving three percent to be shared among other important sectors such as health, education and agriculture.
Treasury projects the economy to grow by 2.7 percent in 2023.
