Storm puts Malawi economy on edge
Recovery process derailed
By Chimwemwe Mangazi & William Kumwembe:
While Malawi was still nursing bruises of last year’s Tropical Storm Ana, coupled with exogenous shocks emanating from
Covid pandemic and the Russo-Ukrainian War, Cyclone Freddy, which landed into the country at the weekend, has hit the economy hard.
As of Tuesday evening, the situation was dire. More than 190 people were confirmed dead, with thousands of others still missing.
Over 72 hours of non-stop rains and heavy winds caused floods and mudslides which had damaged power line, roads and farmlands and livestock in about 10 districts of the Southern Region.
The already volatile power supply has been intermittent thenceforth, while most roads turned impassable, putting gains the country was recording in the past months in tatters.
The disaster has also disrupted water supply and telecommunication services.
National budget affected
Minister of Finance and Economic Affairs Sosten Gwengwe Tuesday said the Treasury will re-align the K3.87 trillion 2023-24 National Budget which he presented to Parliament just two weeks ago, to accommodate the recovery budget line.
Gwengwe was in the company of other cabinet ministers who toured some of the affected areas in Blantyre to appreciate the extent of the damage caused by the cyclone.
He described the development as reverting but was quick to indicate that the focus will be to relook at what was already budgeted for and reprioritise as continuing borrowing will not help.
“This is another two steps backwards as far as our economy is concerned. We keep on having so many shocks one after another and this Cyclone Freddy has come with more devastation than the other cyclones we have had before. We are talking about loss of the crop which we almost had and that signals that we will have to look at issues of food security all over again.
“The infrastructure damage is also huge which means that even the budget which we presented the week before last will need to be realigned,” Gwengwe said.
He said the amount allocated for unforeseen expenditures was very limited.
Industry, experts sent shivering
Private sector the Covid pandemic, players fear for the operating environment and economic outlook which they say have become more volatile and murky, respectively.
The Malawi Confederation of Chambers of Commerce and Industry (MCCCI)— an umbrella body for the private sector players, said the intermittent power supply, road cuts and property damage affecting some businesses, staff and customers, has already disrupted business operations.
MCCCI President Lekani Katandula said there will be a significant adverse impact on the private sector due to the recent developments.
“We must all look at appropriate resilience mechanisms going forward as these events are sadly becoming frequent.
“We should also look at concerted efforts to reverse the environmental degradation that is cited as a contributor to these weather events,” Katandula said.
Economics Association of Malawi (Ecama) Executive Director Frank Chikuta said the immediate economic impact is on the disruption to economic activity as people try to come to terms with the tragic loss of lives and livelihoods, damaged infrastructure and power supply, sanitary infrastructure and other related utilities.
He said the other impact is on public finances as the government implements search and rescue operations, rehabilitation and rebuilding of livelihoods and infrastructure.
“Ultimately, economic growth is also likely going to be negatively affected. The government should quickly mobilise resources and technical expertise to help in the rebuilding process.
“In times of disaster development partners and friends usually assist with financial and technical resources through grants which may help to reduce pressure on the country’s meagre resources. What is required to unlock such resources, is to demonstrate need and put structures to avoid pilferage,” Chikuta said.
Malawi University of Business and Applied Sciences (Mubas)-based economist Betchani Tchereni said the extent of the damage is spread across the household, government and business levels.
“Agricultural produce has been washed away in the affected districts, whole fields of grain being washed away or buried in mud. This has come at a time the Affordable Input Programme (AIP) had logistical challenges too. The harvest may be as expected, such that the second crop estimates will be interesting to watch,” he said.
The recent Malawi Economic Monitor (MEM) published by the World Bank indicates that lack of sustained economic growth, along with continued inflationary pressures and recurrent weather shocks, will make it more difficult to reduce poverty in Malawi.
It holds that the increased frequency and severity of shocks related to climate change create additional downside risks and will require a sustained focus on adaptation investments.
“The World Bank Country Climate Development Report for Malawi finds that climate change shocks could reduce Gross Domestic Products (GDP) by up to 9 percent by 2030. It could also push another 2 million people into poverty by 2030.