Secretary to the Treasury Betchani Tchereni has said, at K25 trillion, Malawi’s gross domestic product (GDP) is under-reported as it could be three times more.
Tchereni was speaking on the sidelines of an innovation symposium organised by Financial Access for Rural Markets, Smallholders and Enterprises (Farmse) and the International Fund for Agricultural Development (Ifad).
GDP is the most common measure for the size of an economy and measures the value of total final output of goods and services produced by that economy in a certain period of time.
The aim is to quantify the additional value coming from goods and services newly produced, the so-called value added items, not taking into consideration the value of goods and services used to produce them (intermediate consumption).
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Tchereni said there were a lot of informalities happening in the economy to the point that there were a lot of businesses and transactions that were undertaken but not computed in the GDP equation.
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He also observed that through innovation, many businesses in Malawi would be formalised and that it would be easier for the authorities to know what is happening in every corner of the country.
“This, what we call the unbanned economy, is also a very informal economy and we do not need that. We need a formal economy and when the economy is formalised in that nature, the Malawi Revenue Authority will have an easier way of collecting more revenues and, therefore, public service delivery is going to be easy,” Tchereni said.
He said the government was talking to its partners to ensure that innovations aimed at ensuring that all informal businesses were properly registered were enhanced.
In its latest Country Economic Memorandum, titled ‘A Narrow Path to Recovery’, the World Bank notes that Malawi’s disappointing economic growth outcomes can be attributed to policy choices that have worsened an already unfavourable external environment and resulted in significant fiscal and external imbalances.
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The bank says weak fiscal planning and implementation make budgets an ineffective guide to resource allocation.
“Unsustainable debt, driven by high fiscal deficits, is a drain on economic growth. Inadequate management of external balances promotes costly balance of payment crises. Each of these is determined by policy choices.
“Macroeconomic policy reforms, including those currently under implementation, hold the key for Malawi to move from a vicious cycle to a virtuous one.
“The government policies over many decades have aimed to promote food self-sufficiency rather than commercial farming, leaving most Malawians in an underperforming agricultural sector,” the report reads.
