‘No quick fixes to economic woes’
Unsustainable debt levels— now seen at K5.8 trillion or 56.8 percent of the gross domestic product— coupled with a weak fiscal environment have led to a continued yawning budget deficit over the years, with donor taps for direct budget support remaining closed, maybe until a new Extended Credit Facility programme with the IMF is in place. The country needs $3…
There appears to be no hope for quick fixes to challenges rocking the country, including forex and fuel shortages, which are stifling chances of economic recovery and growth.
A resurgence of the April 2012 experience, lately, where long queues at fuel pumps are leading motorists into panic-buying mode for the commodity, has rekindled the debate on the need to tame structural challenges facing the economy.
Unsustainable debt levels—now seen at K5.8 trillion or 56.8 percent of the gross domestic product (GDP)—coupled with a weak fiscal environment have led to a continued yawning budget deficit over the years, with donor taps for direct budget support remaining closed, maybe until a new Extended Credit Facility (ECF) programme with the IMF is in place.
This has had a bearing on the Balance of Payment position for the country— where, already, mismatches between forex demand and supply are glaring.
The country needs $3 billion per year to finance its import bill, but only generates $1 billion. And fuel imports requirement, pegged at $600milllion per year, forms a larger part of the import bill.
At least $80 million is needed for the country to normalise the fuel supply according to a consortium of fuel importers, Petroleum Importers Limited.
But commercial banks are now rationing supply of the forex, a clear indication that the coffers are almost dry.
Asked when the situation would normalise, Malawi’s Chancellor of the Exchequer’s response was “soon”.
The Finance Minister, Sosten Gwengwe, conceded the economy is going through a tough patch, calling for resilience.
“Our primary job is to make sure that we salvage the situation in favour of the private sector so that it starts ticking again; resolve the energy issues as quickly as possible and we know that, in the next one or two months, we should be back on our feet, energy wise, and that will translate, again, to other savings,” Gwengwe said.
Commenting on the issue of rising public debt, which is a thorny issue affecting the country’s talks with the IMF over a new ECF, Gwengwe said the government is working towards addressing the bottlenecks.
“We have avoided the temptation of solving the debt problem by committing or contracting more debts, which is what has been happening in the past decade and that has just made matters much worse.
“We are trying to explore a window, no matter how tight it is, to see if we can deal with our debt problem by other means other than just getting more and more debt,” Gwengwe said.
Economist at the Malawi University of Business and Applied Sciences, Betchani Tcheleni, said while there could not be quick fixes to the economy, there is a need for sacrifices to be made to contain the pressure.
He suggested, for example, cutting on the imports bill by banning importation of non-essential commodities, putting further restrictions on foreign trips for government officials and ensuring prudence in public financial management.
“It is high time we started looking at and doing things differently. The problems are structural in nature,” Tcheleni said.
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