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Another year of economic volatility

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Frank Chikuta

At the end of 2021, the atmosphere was filled with some euphoria for a possible economic recovery from pangs of the Covid pandemic, and a plausible growth henceforth.

Industry players were upbeat that 2022 would bring a breather, as all key economic indicators were in red then.

The Treasury, in the 2021- 22 National Budget, projected an annual economic growth rate of 5.2 percent in 2022, up from 0.9 percent the preceding year.

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To the dismay of many, 2022 started on a poor note, a trajectory that dominated a greater part of the year.

Effects of weather-related shocks on the agriculture sector, coupled with global supply chain disruptions due to the Russo-Ukrainian War, pushed commodity prices up. Inflation maintained an upward spiral.

Headline inflation moved from 12.1 percent in January 2022 to 26.7 percent in October and is expected to average above 20 percent.

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The country has been experiencing an acute shortage of forex, such that the 25 percent devaluation of the kwacha in May could not get anywhere closer to containing the prevailing pressure from demand and supply mismatches.

The industry suffered a huge setback throughout the year owing to intermittent power supply as well.

Economists and other business operators already rate 2022 as a year to forget.

Economics Association of Malawi Executive Director Frank Chikuta says the government should work towards addressing the structural bottlenecks to doing business in the country.

“[These] include the establishment of structured and well-regulated markets, implement short and long-term measures to address the foreign exchange shortages in the economy and continue with fiscal consolidation.

“The government should address the electricity shortages by speeding up the repair works to the damaged hydroelectric power plant and investing in new plants and alternative sources of electricity,” Chikuta say.

He indicates that albeit the challenges rocking the economy, effort was deployed by all stakeholders to at least contain the pressure.

Chikuta hails the government for what he rated as successfully negotiating for the International Monetary Fund (IMF)’s $88.3 million Rapid Credit Facility.

Due to the forex woes, for some weeks, the country saw a resurgence of long queues at filling stations as fuel pumps ran dry.

But Center for Social Concern Programmes Officer responsible for Economic Governance Bernard Mphepo lauded the government for containing the pressure and working towards stability of supply.

Mphepo was, however, quick to point out that the government should put effort into expanding markets for local products.

“We need to invest in marketing and trade of local products and agriculture products. We need to promote the manufacturing industry, commercialise the agriculture sector, invest in irrigation technology and in alternatives to chemical fertilisers,” Mphepo said.

Executive Director of the Consumers Association of Malawi John Kapito says the turbulent economic situation experienced in 2022 had a negative effect on disposable income.

He said failure by the government to grow the economy by improving exports and failure to create an enabling environment to create wealth among Malawians made matters worse for poor Malawians.

“The country needs a robust financial policy with all key sectors mandated to operationalise the plans and Malawi needs to prioritise key sectors that can be supported and align our budgets to only key productive sectors,” Kapito said.

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