Barely a week after the International Monetary Fund (IFM) declared that its economic programme in Malawi was off-track, the World Bank has said there are some policies within the country’s programmes that are weighing down on Malawi’s growth.
The global financial body, however, agrees with other observers that the floods that hit the country at the beginning of this year have also negatively impacted on economic growth as resources are being channelled towards subsequent interventions.
Responding to questions on Monday from Malawian journalists in Lilongwe during a journalists in Lilongwe during a video conference which was coordinated in Washington DC, World Bank Acting Chief Economist Punam Chuhan-Pole said Malawi is undergoing a fair share of fiscal stress.
The conference, which was conducted for journalists across Africa, also marked the launch of the World Bank’s new Africa’s Pulse—a biannual analysis of economic trends and the latest data on the continent.
“[In Malawi] there has been a fair amount of fiscal stress in terms of the absence of strong fiscal discipline. There are subsidies, the wage bill and the debt is also rising. [These] are weighing on the country’s growth,” said Chuhan-Pole.
Last week, IMF singled out Malawi’s K50 billion Farm Input Subsidy Programme (Fisp) as one of the costly subsidies in the budget that need to be reduced.
The World Bank said sub-Saharan Africa countries including Malawi continuing to grow, albeit at a slower pace, due to a challenging economic environment and the growth “will slow in 2015 to 3.7 percent from 4.6 percent in 2014, reaching the lowest growth rate since 2009.”
Meawhile, the global financial body has said Malawi and other African countries need to properly balance their revenue, coming through taxes, and structural reforms aimed at alleviating domestic impediments to growth.
When The Daily Times inquired from the World Bank officials in Washington if its proposal of governments boosting revenue through taxes does not contradict incentives to woo more investors, Chuhan- Pole said streamlining tax measures could result in more compliance.
She said: “Most African countries have very low taxes: much lower than in developed countries. But if properly streamlined and simplified so that those that pay them understand better, they can significantly improve growth.”
While the new Africa’s Pulse lists a number of countries including Mozambique and Tanzania as posting robust growth, spurred by investments in energy and transport, consumer spending and investment in natural resources sector, it does not say anything on Malawi.
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