The World Bank has reiterated the need for Malawi to align political incentives with development goals for the country to attain its growth aspirations while cushioning people from economic challenges.
The Bretton Woods institution has also urged local authorities to ensure efficiency in public investment, catalysing private investment and enhancing economy-wide efficiency and macroeconomic policy reforms to move from a vicious cycle to a virtuous one for the local economy.
This is contained in its recently published Malawi Country Economic Memorandum, titled ‘Narrow Path to Prosperity’.
According to the report, market distortions and a lack of firms’ competitiveness result in low dynamism and unrealised productivity gains.
It says low overall productivity levels and large gaps between productive and unproductive firms suggest that many firms are not using their resources efficiently to compete and grow.
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Figures provided show that over the past 30 years, Malawi’s per capita gross domestic product has cumulatively increased by over 50 percent, a trajectory comparable to that of other countries in the region but which is insufficient to significantly raise living standards and close the gap with its neighbours.
“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.
“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-payments crises,” the World Bank says.
It says firms face significant barriers, including in accessing finance, information and international markets.
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It says the private sector would also benefit from better access to electricity, lower levels of corruption and a more stable policy environment. This would, in turn, bolster growth.
In an interview, economist Marvin Banda said the recommendations were not new.
He said, for example, Article IV consultations that preceded the most recent Extended Credit Facility award also came with recommendations after identifying problems the country has been facing since multiparty elections of 30 years ago.
“However, this has proved historically difficult considering that we are entering a campaign cycle,” Banda said.
