The National Planning Commission (NPC) says the development partners’ budget support unlocked by the International Monetary Fund (IMF)’s Extended Credit Facility (ECF) is not sustainable.
In his Mid-Year Budget Review analysis, NPC director general Thomas Chataghalala Munthali said in an environment of acute forex shortage, the monetary authorities will keep on devaluing the currency while chasing the parallel rate, with Malawians facing price increase shock every time there is a devaluation.
He said having a vibrant private sector that is fully incentivised to either bring new investments or scale-up is key to generate own forex and revenues.
Said Munthali: “Sending unequivocal signal of ‘Malawi is open for business’ is a must.
“This will require effective engagement with the private sector, both large as well as small and medium enterprises, with regard to the laws and other incentives that will make them immediately begin to make investment decisions.”
Munthali: Take an active role role in catalysing investments
He said while ensuring that Laws such as the Crops Bill and the recently enacted Land Laws are win-win for the citizens and investors, laws such as the Special Economic Zones should be prioritised.
Munthali said beating regional averages in the business environment incentives is a defined quick win in the First 10-Year Implementation Plan (MIP-1) of Malawi 2063, the country’s long-term development strategy.
Munthali also advised government to take an active role in catalysing investments in the strategic sectors of the economy where forex can either be generated or preserved through import substitution.
In November this year, Reserve Bank of Malawi devalued the kwacha by 44 percent, a move that was expected to unlock about $175 million from the IMF under a three-year ECF expected to boost the supply of foreign exchange on the market.
Following the ECF approval, Minister of Finance and Economic Affairs Simplex Chithyola Banda said Malawi is expected to receive $240 million (K408 billion) between now and end of March 2024 from donors.
The minister further said over and above this, Malawi is also expected to be assisted by donors through front loading of some project disbursements to cushion the population to the tune of $146 million (K248.2 billion), through purchase of fertiliser, maize, pharmaceuticals and importation of raw materials for the private sector.
However, Economics Association of Malawi (Ecama) executive director Frank Chikuta earlier observed that all sectors of the economy believe that the ECF is the solution to the economic challenges.
“These built expectations are a key variable to economic growth and could affect the economy either in terms of prices, revenue and supply. There is a lot of work to do to manage these expectations