$1.1 billion injection fails to heal economy

Betchani Tchereni

Malawi has never experienced war since attaining independence in 1964.

Despite enjoying peace and tranquility over the years, its per capita gross domestic product (GDP) is the third lowest in sub- Saharan Africa, according to the International Monetary Fund (IMF).

Over the past decades, Malawi has been supported by the international community, including the IMF, but the economy has remained fragile with the exit point from fragility not in sight.


In fact, between 2005 and 2020, the international community continued to support Malawi through budget and off-budget support, and project financing with the total official development assistance (ODA) estimated to have averaged $1.1 billion (about K1trillion) or 12 percent of GDP.

Despite the significant support from the international community, the economy remains in the Intensive Care Unit (ICU) with the incidence of poverty and food insecurity in Malawi amongst the highest in the world; human development indicators rank amongst the lowest; and less than 20 percent of Sustainable Development Goals (SDGs) have been met.

In its 2021 Article V Report, the IMF says Malawi’s challenges are compounded by weak governance and poor quality of public administration combined with limited fiscal space and high public debt which weigh on the government’s ability to effectively implement policies, especially those targeted at improving incomes and living standards across the population.


Since 2005, Malawi has seen leaders come and go, all with the same message of prescribing a bitter pill for the economy with the hope that it will get better.

But despite the citizenry being told to tighten their belts with the hope that one day things would get better, economic bliss has remained a farfetched dream.

In the end, the country’s economic growth has remained miserable, very shy from the prescribed 6 percent growth rate needed to lift Malawians from poverty.

Welfare monitoring body, the Centre for Social Concern (CfSC) Executive Director, Father James Ngahy says it is extremely hard to understand why Malawi continues to compete with war-ravaged countries for the title of world’s poorest country.

He said, over the years, Malawi been spending trillions of taxpayers money on national budgets and has received billions of Kwacha in development assistance but that its people remain in a sorry state.

According to Ngahy, deep rooted corruption could be attributed to the country’s stagnation in as far as economic development is concerned.

Renowned University of Malawi economist, Ronald Mangani, says although growth was set as the unequivocal primary objective of neoliberal policies as declared by the then IMF managing director Michael Camdessus way back in 1990, Malawi is not the only country where neoliberal policies have failed miserably on this important metric.

According to Mangani, significantly negative effects of these policies on growth dominate literature.

This, Mangani says, is attributed in part to the deflationary bias that is inherent in neoliberal policies, mostly achieved by raising the cost of credit and dampening private investment.

“Associated currency devaluation and depreciation policies lower incomes in real terms, worsen the balance of payment and deepen poverty and vulnerability. The IMF’s adoption of the Poverty Reduction and Growth Facility (PRGF) framework at the turn of the millennium was a clear admission that neoliberalism was deepening poverty,” he said.

He further notes that both the last global financial crisis and the Covid pandemic have shown the importance of active fiscal policy in economic management, an effective tool that is available to address deficient aggregate demand challenges.

The pandemic, Mangani notes, has renewed our responsibility to question the relevance of the growth dampening and poverty-deepening orthodox neoliberal policies.

“In our objective interrogations, we always go back to the same conclusions: neoliberalism owes its allegiance in founding and funding to powers whose main preoccupation is domination. In that regard, it is successfully delivering on its objectives of keeping poor countries poorer, perpetually aid-dependent and permanently colonised.

“In such a setting, the country’s political process is a folly whose winners delegate the economic management function to the descendants of slave traders, colonialists, murderers of our heroes and looters of our resources. Yet, in the end, the elected leaders take the blame for the depressing socio-economic outcomes. Malawi perfectly fits this description,” he adds.

Centre for Research and Consultancy Director, Milward Tobias, says much of the support that Malawi has received from the international community has been channeled towards the social sector, in areas which, though critical, do not bring quick results.

He notes that support from the international community has focused on improving areas such as health, education, water and sanitation and others which are critical but cannot grow the economy on their own.

“Good health, for example; the assumption is that I need quality health services so that when I get sick, I don’t spend more days out of work. The assumption is that there is work somewhere within the economy which I must do and contribute to GDP growth.

“The problem with Malawi is that the work is not there. That is to say, after two days of getting sick, I go back to my life of staying idle at home instead of working. In the end, there is less productivity,” Tobias said.

Tobias added that the national budget has been burdened by expenditures towards consumption rather than production.

This, according to Tobias, ends up in a situation where Malawi spends the bulk of its hard-earned taxes in consumption rather than in areas that would boost production and exports to earn the much-needed foreign exchange.

Malawi University of Business and Applied Stciences (Mubas) economist, Betchani Tchereni, agrees with Tobias that although Malawi has enjoyed massive financial support from the international community, the assistance has not been in investments such as manufacturing companies or industries or market access issues.

This, Tchereni says, has resulted in the local economy remaining agrarian.

“Again you have procurement of goods and services which are open to global competition. The benefitting manufacturing companies are therefore those from outside Malawi, which does not spur growth at all.

“We remain with the buildings without repo effects being felt,” Tchereni says.

On his part, President Lazarus Chakwera believes the economy was severely damaged by three decades of bad governance, cycles of natural disasters, months of political instability and waves of the Covid pandemic.

Chakwera believes Malawi’s economic sickness is not going to be cured by painkillers but strong doses of bitter medicine.

In December Chakwera launched the Socio-Economic Recovery Plan to stop the economy from bleeding from its four wounds of structural limitations, gross imbalance between imports and exports, the Covid pandemic and government waste.

Whether the SERP will yield the much-needed results and help the economy move out of the ICU for the first time in many years, only time will tell.

But on the streets, Malawians remain angry as witnessed by never-ending episodes of demonstrations against deteriorating quality of life.

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