Economic analysts have warned that Malawians should brace for hard times in fending for basic goods and services because government’s failure to meet International Monetary Fund (IMF) targets and that most Malawians will not afford to purchase basic items by December 2015.
IMF has suspended loans to Malawi for failing to cut its wage bill and improve revenue collection, making it less likely Western donors will resume budgetary aid.
According to published reports, the University of Malawi’s economics professor Ben Kaluwa feels the current economic situation, as assessed by the IMF, will culminate into worsening donors’ confidence and further frustrate both foreign and local investors as there is a gloomy economic outlook.
Budget assistance from Western donors worth millions of dollars has been withheld for two years now —amid concerns of Cashgate, the plunder of public funds at Capital Hill— . Such aid has historically accounted for about 40 percent of the national budget.
The IMF said the loan facility would remain suspended until Malawi’s government met certain targets.
Kalua, who is based at Chancellor College in Zomba, feared that the situation will likely lead to rising lending rates in banks hence denying businesses the much-needed capital to expand their business ventures.
“Malawi has well-trained economists, but government has not allowed them to do their professional work. On varied reasons, government has tended to disregard the advice of economists; and this is the major challenge and stumbling to the growth of our economy,” Kalua is quoted by The Nation newspaper.
Kalua argued that government overspending has essentially piled up inflationary pressure on the market.
He projected that come December “most poor Malawians would not afford to buy even a packet of sugar if the economic situation remains as it is.”
Centre for Social Concern (CfSC) economic governance expert Mathias Kafunda told the paper that the urban population, which largely depends on commercial goods and services, will be severely affected in the short to medium-term.
“If inflation continues to increase at an increasing rate, then the situation will negatively impact on the pockets of the urban poor whose income remain static,” he said.
Inflation—the rate at which prices of goods and services change— is at 22.2 percent.
Prices of basic goods such as cooking oil, sugar and maize, among others, have jumped up to the sky in recent months mainly on account of a weakening of the local currency beginning end June this year as importers and traders are passing on the high cost of importing to consumers.
Minister of Finance, Economic Planning and Development Goodall Gondwe also admits that the economy is currently in “a critical point”.
He has bassured the IMF on Wednesday that government is geared to improve business environment and the macroeconomic situation in general.
Gondwe said he is “ absolutely confident “that at the end Malawi will end up with a robust and positive growth.
The IMF said on Wednesday that Malawi’s economic growth would slow to 3 percent this year from 5 percent in 2014, reflecting a decline in the maize harvest and weak private- sector investment and consumption.Follow and Subscribe Nyasa TV :