The Institute of Chartered Accountants in Malawi (Icam) and the Economics Association of Malawi (Ecama) have said that Malawi needs to create more trade partners and maximise production first before dealing away with donor aid.
This comes after President Peter Mutharika said on Monday in his address to the nation that the issue of donor aid is watershed in the country’s history and another beginning for Malawi.
Commenting on Mutharika’s remarks, Ecama President, Henry Kachaje, said Malawi’s economy has struggled and registered diminishing economic growth rates for the past three years and the private sector is shrinking, a development that signals that independence from donor support is not yet certain.
“It will be too early to start celebrating our resilience and ability to run the country independent of donor support. As we strive to wean off from donor support, it is important that we build our private sector and other key productive sectors like agriculture and tourism so that we have a solid foundation for self-reliance,” Kachaje said.
Kachaje said this would require building a resilient macroeconomic environment that supports local economic growth, which according to him remains a challenge at the moment.
Icam President, Henry Chowawa, said that while it is a welcome idea to run the country without donors, Malawi needs to tread carefully so that some sectors do not suffer from financial independence shocks.
“Donors also face challenges and one day they will change goal posts, so it is a good idea. However, let us create partners in areas of trade and maximise production of goods and services for export business,” Chowawa said.
A Development Economist from the University of Malawi, Sane Zuka, has since described Mutharika’s statements as not practical, saying in the absence of budgetary support, government will continue to tax heavily the middle class something that will negatively affect their potential to save.
“What is required for this country to register sustained economic growth is to increase savings from the middle class that can then be channeled to the private sector through the money market,” he said.
Zuka noted with the current taxation policies, the working class is being milked to finance government operations.
“While this is the case, politicians and top government executives continue to get a lot of benefits that are not taxed. Government should also translate these benefits into a clean wage that should be taxed,” he said.
But Mutharika said that consequently, public service delivery was affected, especially in a number of key sectors including agriculture, health, education, among others.
“We have had to survive the end of donor budgetary aid, enough. A country that was almost bankrupt. A country without budgetary support.
“Our situation was compounded with unprecedented floods, drought and hunger for two continuous years. But we have prevailed in our difficulties,” Mutharika said.
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