Malawi Confederation of Chambers of Commerce and Industry (MCCCI) has advised the government of Malawi to support the local industry to prevent the economy from collapsing and for fast recovery after the Covid-19 pandemic.
The advice is carried in the private sector mouthpiece’s 4th quarter economic review for 2020.
According to the review, businesses have suffered huge losses from the first wave of the pandemic in 2020 and the forecast looks darker due to the second wave of the pandemic, which has hit Malawi harder.
MCCCI believes the pandemic, will increase further Malawi’s appetite for imports. “Government must make an effort to provide financial support to local producers who use a large percentage of local resources in their production so that they are able to increase their capacity and meet the consumption demands of the economy,” the review reads.
MCCCI further says that, amid the tight financial conditions being experienced at the moment, expansionary monetary policy will need to be maintained until the country can secure a safe and durable exit from the crisis.
Monitory authorities last year provided some incentives such as reducing the policy rate from 13.5 percent to 12 percent, reducing the domestic currency Liquidity Reserve Requirement (LRR) by 125 basis points to 3.75 percent (aligned with the foreign currency LRR), and reducing the Lombard Rate by 50 percent to 0.2 percentage points above the policy rate, among others.
Commenting on the proposals, economist Edward Chilima agreed that the government should maintain the expansionary monetary policy to stimulate demand for local goods and services because depressed demand cannot benefit the economy.
“There is need for boosting purchasing power to stimulate the necessary demand. The economy requires a boost, in terms of increased money supply. It may be inflationary in the short term but we cannot afford to have depressed demand of commodities for a period longer,” Chilima said.
The Covid-19 pandemic disturbed trade patterns due to travel restrictions and Malawi suffered as well due to its over-reliance on imports.
Justin Mkweu is a fast growing reporter who currently works with Times Group on the business desk.
He is however flexible as he also writes about current affairs and national issues.