World Bank tips Malawi on economic growth: Caution on subsidies splurge

World Bank has tipped Malawi and other sub-Saharan Africa countries who are continuing to grow, albeit at a slower pace, due to a more challenging economic environment, that there is need to embark on structural reforms to alleviate domestic impediments to growth.

Punam Chuhan-Pole, lead economist Africa Region at the World Bank Group headquarters

Punam Chuhan-Pole, lead economist Africa Region at the World Bank Group headquarters

World Bank not impressed with Fisp

World Bank not impressed with Fisp

Growth will slow in 2015 to 3.7 percent from 4.6 percent in 2014, reaching the lowest growth rate since 2009, according to new World Bank projections, Africa’s Pulse

These latest figures are outlined in the World Bank’s new, the twice-yearly analysis of economic trends and the latest data on the continent.

The 2015 forecast remains below the robust 6.5 percent growth in GDP which the region sustained in 2003-2008, and drags below the 4.5 percent growth following the global financial crisis in 2009-2014. Overall, growth in the region is projected to pick up to 4.4 percent in 2016, and further strengthen to 4.8 percent in 2017.

“To withstand new shocks, governments in the region should improve the efficiency of public expenditures, such as prioritizing key investments, and strengthen tax administration to create fiscal space in their budgets.”  says Punam Chuhan-Pole, Acting Chief Economist, World Bank Africa and the report’s author

Speaking to journalists during a video conference which was coordinated in Washington DC, Chuhan-Pole said Malawi is undergoing a fair share of fiscal stress.

“in Malawi there has been a fair amount of fiscal stress in terms of the absence of strong fiscal discipline. These are subsidies, wage bill and the debt is also rising ,” he said.

The World Bank has been arguing that Farm Input Subsidy Programme (Fisp), which currently takes up 70 percent of the agricultural public expenditure and 10 percent of the national budget, has not contributed significantly to poverty reduction as in Malawi as hoped.

The bank advised Malawi to increase farmers’ contribution towards the Fisp from three percent to 30 percent if it is to relieve its strain on public expenditure.

Civil Society Agriculture Network (Cisanet) Executive Director Tamani Nkhono supported the bank’s proposal to increase farmers’ contribution in Fisp to 30 percent, saying the subsidy programme has “failed to reduce household poverty due to the enormous flaws on its design.”

Moving forward, World Bank argues that beyond macroeconomic policies, there was the need for structural reforms to ignite and sustain productivity growth in all sectors in the region.

Chuhan-Pole, also said the region should focus on policies that would promote growth, adding that the poor should be considered when implementing structural reforms.

World Bank also calls for boosting revenues through taxes and improved tax compliance., saying complementing these efforts, governments can improve the efficiency of public expenditures to create fiscal space in their budget.

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16 thoughts on “World Bank tips Malawi on economic growth: Caution on subsidies splurge”

  1. If we can take a look critically W.Bank is not missing the point, besides that these are just some of the points raised by the world bank,and i will even try to add some of the crucial points ommited from the above list,not neccessarilly bad to the government but those people who were given a chance to let people know about this vital TIP did not want to include them all on this list. However, some knowledgeable members from various angles totally different from that of government are working on it.we should really give thanks to world bank by letting us know in advance and ask God to help us to work on it amiably.

  2. wa ku Mitchesi kujaaaaa!!!! says:

    Apparently, the World Bank, and its likes, will never be satisfied until all of us Malawians, or Africans for that matter, are always on our knees begging. Begging for resources and knowledge from them. What does Ms. Chuhan-Pole think of the numerous farm subsidies in the US and other rich countries?
    You can criticize some of our structural deficiencies. But leave our subsidies, like FISP alone. Don’t touch them.
    May be visiting consultants should step out of their Range Rovers, sometimes, and ask the subsistence farmer in the village about his/her opinions. And economics textbooks do not always tell the truth. Especially when most the books are Eurocentric.

  3. Jimuni says:

    What can World Bank point at as having a made contribution with a positive impact on soceity or a country anywhere in the world?

    Any country that subsribes to World Bank or IMF policies is DOOMED!!!

  4. Trevor Manyi says:

    577 BILLION woyeeee

  5. Lu.. says:

    The biggest problem people deliberately ignore in this country is overpopulation! This country needs tough laws with regards to having a child like the ones imposed in china in the seventies! One family one child policy! It sounds inhumane but interesting next 10 years this country will not have any resources to support thus population. Most people are unemployed already, the employed are heavily taxed to cater for the majority poor. All these things fisp etc are very much linked to overpopulation. Thus country will NEVER develop no matter what! The white people know it and the rest of the world know it! We are in a vicious cycle that can never be broken,

  6. keliland says:

    Fisp really has changed household povety rate only pipo from real poverty lines can appreciate than those living in urban. The problem with azungu they want to drive pali ponse comparing with their standards they 4get that we r too far from them. Wat needed its a good strategy and implementation plan.FSIP shd continue

  7. ALOSWEA says:

    To reduce wage bill is to terminate jobs of some civil servants increasing the number of jobless pipo thereby increasing poverty,this Priton is creating now mountains a head of Us . The way out is industrialized farming

  8. Mirella K says:

    ‘…the subsidy programme has failed to reduce household poverty due to its ernomous flaws in its design’…well should this be the case, which is likely, then, the answer is not the bla bla bla above. the answer is to help the govt ‘design it better’…Times often advices from these big western institutions are mostly empty as they are more of academic than practical. Nonetheless, they are worthy trying. Ooooh yes one thing, not only institution, a Malawi, trust me, so long as we have the likes of achina Dausi at the fore front of the matters of the nation’s destiny..we are a failed state!!!

  9. Moyenda says:

    World Bank has clear partisan business interests. Their advice should be taken with a pinch of salt. it is like a gold digger – when she says “you are handsome, you look sexy, admirable” or if she is too available to make you feel big, TAKE CARE OF YOUR WALLET.

  10. Balamanthu says:

    NYAPHAPI WOYEE!NYAPHAPHI WOYEE! CHOMWA MADZI OMETERA NDEVU.IWE NDIYE DZIKOLI LAKUKANIKA USANAYAMBE KULAMULIRA!
    !

  11. Fiscal space cann’t be created in Malawi. A DPP aba nthawi zanji. shameless leaders

  12. Clement says:

    Am sure this is a good piece of advise to take from world bank not stupid accusations from useless oppositions. The govt is busy rectifying your 31yr mess up but you can’t notice coz of power hungry. Sometimes I understand leading people it’s something very difficult coz you lead virombo ena afiti agalu etc. DPP will fix this economy soon and it’s possible for them. Let me take this opportunity to thank people from chitipa for your support to the govt hope you know how good DPP is and also Ntchisi and Dowa big up.

  13. Balamanthu says:

    Malawi should also be advised to stave off corruption which starts from state house to everybody.When the leadership leads by example, all these things will go.Unfortunately, such leadership will not come from the DPP led government that is mostlyled by seasoned thieves and crooks.When the same is spiced by cryonism and absolute nepotism favouring those from Mulhakho belt, it makes things worse.

  14. drzeus says:

    Genuine advice from someone who wishes Malawians well but unfortunately the DPP government does not take any advice from anyone, u can tell from the rantings of the Reserve Bank Governor that what he was ranting is the official line of the government and its what they will advise the President.

  15. chimwemwe says:

    let world bank give some aid to malawi for a change, we dont want your tips, show you serious in helping poor malawians and dont keep on changing goalpost whenever it is your time to give aid, we are tired of your excuses

  16. chipapwiche says:

    The problem with farm input subsidy is that it has become a political tool but to say the truth its not effective at all, most money allocated to it goes into administration and not to the actual inputs required. What if you take same money invest in mechanized farming through irrigation. have plenty food and sell it cheap, or distribute to the poorest who cannot afford to but. If food is plenty and cheap, those smallholder farmers will sell locally to the locals and venders will not go into the villages to buy from these locals.
    As we are talking now officials already started organizing meetings using the same allocation, drawing huge allowances at the expense of the villager, drawing money for fuel etc

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