An economics think-tank, Malawi Economic Justice Network has challenged authorities to prioritize allocation of resources towards production and social protection programs in the 2024 – 2025 national budget.
MEJN as the network is fondly called made the observation during a pre-budget consultation meeting in Blantyre aimed at soliciting views on implementation of the 2024 – 2025 fiscal plan.
The consultations are part of a five year project intended to promote economic governance which the network is conducting in partnership with the African Forum on Debt and Development with funding from the Bill and Melinda Gates foundation.
Speaking to MIJ Online, Mike Marvin Banda, Southern Region Coordinator for MEJN said boosting investments in productive sectors is key to revamping Malawi’s economy.
Also at a time data from the International Monetary fund indicate a significant rise of Malawi’s public debt to K12.56 trillion as at end November 2023, Banda noted that investing in productive sectors was essential to maximize economic gains in order to reduce borrowing.
“We need to transform the nation from predominantly importing and consuming to a producing and exporting economy. We can only do that if we invest in productive sectors, we need to invest our energy in implementation of mega farms to increase production in the agriculture sector.
“A big concern is that our debt levels keep growing and this is suffocating the economy which is unable to attend to other social and productive issues because a huge chunk of resources is going towards debt servicing. We need to FastTrack implementation of the debt retirement fund and debt restructuring strategy,” Banda explained.
Further, Banda expressed concern with the widening gap between the rich and the poor as 70 percent of Malawians are said to be living below the $2.15 international poverty line as reports the United Nations.
According to him, it was important for authorities to balance investments towards social services and production as means for reducing economic inequalities.
“There should be a balancing act between social services and production, once we get to that level, we can reduce social inequalities. For government to finance social expenditures we needs to mobilize funds and we can only do that by producing. The nation has been hit by a number of calamities and poverty levels are rising so there is need to cushion Malawians,” Banda said.
On his part, Maynard Nyirenda, a representative of Civil Society Organizations called for collaborative efforts in promoting transparency and accountability to ensure successful implementation of the 2024-2025 budget.
“We need to hold government to account so that what the country prioritized is implemented. For instance on agriculture commercialization, the nation has to finance mega farms and the green belt initiatives. We also need to build an enabling environment by reducing corruption and promoting mindset change and environmental sustainability. This is key to achieving the agenda 2063”. Nyirenda said.
Simplex Chithyola Banda, Minister of Finance is on record saying the 2024-2025 national budget takes the plight of Malawians with government working tirelessly to promote infrastructure development and economic diversification in order to boost exports for the nation to reduce its trade deficit.
According to data from the central bank, Malawi closed the year 2023 with a trade deficit of about $1.6 billion (MK2.7 trillion), as the countries export earning failed to keep up with its rising import bill.
The deficit was marginally higher than $ 1.5 million (MK2.5 trillion) the nation registered by the end of the year 2022.
Also, commenting on his expectations of the budget, Bond Mtembezeka, an economic expert has advised authorities to ensure that the 2024-2025 fiscal plan focuses on forex generating sectors such as agriculture and mining.
“The economy has not been performing well the last couple of years predominantly due to forex shortages that have caused many of the economic problems that Malawi is facing. The budget needs to be framed in a way that it supports forex generating sectors. We also need to recognize that economic welfare has gone down therefore the budget has to ensure that economic livelihood is supported by measures such as tax cuts”. Mtembezeka said.
Currently, Malawi is implementing a debt restructuring strategy aimed at achieving debt sustainability and closing financing gaps as means for promoting economic recovery.
However, Fadhel Kaboub, associate professor of economics at Dennison University in America and president for the Global Institute for Sustainable Prosperity argues debt restructuring does not change the structures that created the debt trap.
“Africa’s external debt stems from three key areas of economic deficiencies; food, energy and manufacturing deficits. The IMF and the World Bank have systematically contributed to deepening these structural traps by financing and mandating policies that prioritize investments in cash crops for export rather than core crop production to restore food sovereignty.
“The policies also neglect the deployment of renewables that reduce our dependence of fossil fuel imports and deepen our position at the bottom of the value -chain by forcing us to specialize in low value added manufacturing.
“What is lacking is for African leaders to put forward that postponing the payments doesn’t change the structures that created the debt trap” Kaboub Explained.
Malawi’s economy has been sailing through turbulent times with authorities attributing the economic downturn to external factors such as effects of the devastating cyclone Freddy which hit the southern part of Malawi earlier last year and the war in Ukraine.
As of end December 2023, headline inflation stood at 34.50% with food inflation at 43.50% and non- food inflation at 22.80%.
Real GDP growth is projected to strengthen to 2.4% in 2024 from 1.4% estimated for 2023 according to data from the African Development Bank.