The World Bank has warned that the government’s inaction on economic challenges that the country is facing could increase recovery costs.
In the latest 20th Malawi Economic Monitor (MEM), which was unveiled yesterday, the bank expressed worry over what it called the excessive use of limited public resources.
It also said high deficits and increasing borrowing had thrown fiscal management off rail in the context of the Extended Credit Facility (ECF) with the International Monetary Fund (IMF).
The bank has since urged the authorities to frame the 2025-26 budget in a way that it begins to reverse the rate of borrowing and over-expenditures as the first move towards restoring macro-economic stability.
It said this would ensure that the country’s programmes were in tune with the ECF as agreed with the IMF prior to the four-year programme.
“One year since the start of the government’s new macroeconomic reform programme, supported by an IMF Extended Credit Facility and development partner budget support, efforts to address rising fiscal and external imbalances have faltered,” the report reads.
The bank further expressed worry that being an electoral year, when deficits are normally higher than the rest in an electoral cycle, a repeat of the same would plunge the economy in a deeper crisis.
Firas Raad
“Over the past 30 years and five electoral cycles, fiscal deficits during election years were on average 74 percent higher than in the four preceding years. Given Malawi’s existing economic vulnerabilities, a similar lapse in budget discipline would severely compromise macro-economic stability,” the report says.
The bank’s country manager Firas Raad has since urged the authorities to take urgent action as further delays would make the situation unbearable, further raising the cost of recovery.
“Without undertaking serious reform actions now, the pain of the eventual economic adjustment and the risks of further destabilisation will only continue to grow,” Raad said.
Mining Minister Ken Zikhale Ng’oma acknowledged that the economic situation was challenging.
He was quick to say the government would look at the recommendations made in the MEM and work with partners to restore economic stability.
“I want to assure you that the government is working tirelessly with its partners, including the IMF and the World Bank, to restore macro-economic stability that lays the foundation for sustainable long-term growth run,” Zikhale Ng’oma said.
During a panel discussion, former governor of the Reserve Bank of Malawi Elias Ngalande and Malawi Confederation of Chambers of Commerce and Industry (MCCCI) Chief Executive Officer Daisy Kambalame agreed that 2024 was a difficult year as there were half-hearted efforts made in recovering the economy on the fiscal and monetary policy sides.
“We did nothing to save th
