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Experts rate first half as tough

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MAFUTA MWALE – Yes it is true

The local economic landscape remained volatile in the first six months of 2022 due to multiple exogenous shocks and structural challenges, a thing commentators feel would further stifle chances of growth.

The experts cite high inflation, rising public debt and intermittent power supply among major threats to growth prospects.

Local economic think-tank, the Economics Association of Malawi (Ecama), feels the rising cost of goods and services, foreign exchange shortages, frequent power outages, adverse weather conditions, and global supply disruptions disrupted economic activities.

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In an interview, Ecama Executive Director Frank Chikuta said inflation will remain elevated during the remaining part of the year as the country enters the lean period.

“Stability in the exchange rate will depend on policy consistency. However, the recent devaluation should help in clearing the market. The policy rate may be tightened to anchor Inflation expectations.

“The government should, urgently, address the issue of intermittent power supply and reinforce social protection through targeted social safety nets. It must also promote export-led growth by creating a conducive environment as outlined in the National Export Strategy,” Chikuta said.

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Malawi Union of Small and Medium Enterprises President Barbara Banda said businesses slowed down on the account of delayed recovery from Covid impacts as companies did not benefit from any stimulus packages to help them build back on productivity.

She said the development affected buying power in the economy with a net effect of poor business performance.

She added that poor performance of the Affordable Inputs Programme resulted in low outputs and farmers were left with limited buying power.

“They hype of industrial hemp farming left farmers disappointed with the business model that required them to pay for expensive licences on the expectation of getting off-takers and high profits touted by the crop promoters.

“Things are likely to get worse as the war in Ukraine is not showing signs of ending soon. Basic food prices such as those of maize have already gone up to K12,000 up to K15,000 per 50 kilogramme (kg) bag, which is normally the price in December, which is a sign,” Banda said.

Secretary to the Treasury Macdonald Mafuta Mwale conceded the first half of 2022 was tough for the business community as well as the consumer.

He cited the 25 percent devaluation of the Kwacha and the upward adjustment of the fuel pump price as the major movers.

Mwale said the private sector has largely suffered from scarcity of foreign exchange on the domestic market, leading to failure to import the necessary inputs in their production systems, which translated into budget underperformance characterised by below par revenue performance and continued reliance on domestic debt financing.

“The major challenges have largely been on account of the external factors including the tail end effects of Covid pandemic, the rising prices of the strategic imported commodities such as pharmaceuticals, fertiliser, food products and fuel due to the war in Europe.

“On the fiscal front, the major challenge has been debt servicing owing to the huge amount of public debt and the need to settle domestic payment arrears to the private sector. These have diverted most of our resources from current development and recurrent expenditures thereby affecting government service delivery,” Mwale said.

He, however said short-term measures have been undertaken by government to stabilise the foreign exchange market and the exchange rate.

He then challenged local companies to develop local supply chains for their inputs to reduce pressure on the exchange rate and enhance economic activity and economic growth.

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