British High Commission urges Malawi Government to double down on its efforts to control public spending and reduce domestic borrowing

* In reaction to World Bank’s Malawi Economic Monitor which analyses that the country’s economic recovery remains fragile

* Due to lagging implementation of macroeconomic reforms and a series of exogenous shocks impacting the country 

* There are opportunities for the country to use its natural resources to kick start development and make its people more prosperous

By Duncan Mlanjira

The British High Commissioner to Malawi, Fiona Ritchie has added voice to the findings of the Malawi Economic Monitor (MEM) which was launched today in Lilongwe, saying;

“Malawi finds itself in a difficult situation — but as the World Bank’s Malawi Economic Monitor sets out, there are opportunities for the country to use its natural resources to kick start development and make its people more prosperous.

“But this won’t happen unless the authorities make greater inroads in tackling the root causes of Malawi’s current economic problems,” Ritchie said.

Titled; ‘The Rising Cost of inaction-Unlocking the Potential of Malawi’s Mining Sector’, the Malawi Economic Monitor — presented by World Bank’s Country Manager, Firas Raad at Bingu International Convention Centre (BICC) — says: “Malawi’s economic recovery remains fragile due to lagging implementation of macroeconomic reforms and a series of exogenous shocks impacting the country.

“After a series of bold reform measures in 2023, supported by an International Monetary Fund (IMF) Extended Credit Facility (ECF) and direct budget support from development partners, the momentum towards addressing the country’s underlying fiscal and external imbalances have stalled. 

“The inaction accelerates the risk of economic deterioration which inhibit the country’s long-term development prospects,” says the preamble to the report, adding that Malawi is endowed with abundant rare renewable energy minerals — such as graphite, titanium and rare earth elements.

The significant global shift towards renewable energy, has created a recent global surge in demand for green minerals such as graphite, titanium and rare earth elements — all of which are abundantly available in Malawi,” says the report.

In the Malawi Economic Monitors’ special topic; ‘Unlocking the Potential of Malawi’s Mining Sector’, it focuses on the mining sector, outlining how the country’s wealth of energy transition minerals (ETMs) “carries enormous potential for accelerating broad-based economic growth over the coming decades”.

Thus, the British High Commissioner urges the government to “double down on its efforts to control public spending and reduce domestic borrowing; to focus on increasing the availability of Forex to the public and private sector rather than controlling the limited current supply”.

She also appeals to the government “to reduce inflation, including by no longer financing the excessive budget deficit by selling government debt to the Reserve Bank”.

“I don’t underestimate the challenges, but businesses can’t grow and create much needed jobs, and exports and mining can’t catalyse economic growth if inflation is too high, Forex is not available and excessive public borrowing crowds out private investment,” she said.

The comprehensive Malawi’s Economic Monitor analysis of the country’s economic situation highlights both significant challenges and key opportunities for growth — and underscores the urgent need for reforms to stabilise the economy and pave the way for sustainable development.

Some key highlights from the report include:

* Economic Struggles: Malawi’s economy is facing headwinds with negative per capita growth in 2024, primarily due to a severe drought and ongoing foreign-exchange shortages. GDP growth is only at 1.8%, while population growth is at 2.6%;

* Food Crisis: The drought has led to a drastic decline in agricultural output, resulting in 28% of the population facing crisis-level food insecurity;

* Fiscal Pressures: The government is struggling with stalled fiscal consolidation, lower revenue collection and increasing debt;

* Mining Potential: There’s a significant opportunity in the mining sector with several projects in the pipeline, which could boost exports and generate foreign exchange if key constraints are addressed.

Key Priorities

The report identifies critical areas for reform, including:

* Restoring macroeconomic stability through fiscal consolidation, debt restructuring and exchange-rate reforms;

* Boosting investment and exports by removing fuel subsidies and developing transparent mining revenue systems; and

* Building resilience through disaster risk management and expanding energy access.

The report stresses that inaction will lead to further economic deterioration, while decisive action could enable significant growth over the next five years.

The World Bank also faulted the lack of inaction in implementing macroeconomic reforms as a key factor in Malawi’s failure to economically recover from a series of exogenous shocks impacting the country.

Raad warned that failure to implement necessary reforms heightens economic risks and undermines long-term development prospects and he emphasised the need for Malawi to shift from an agriculture-dependent economy and to explore the mining sector as an alternative driver of economic growth.

The Malawi Economic Monitor is a biannual World Bank report analysing economic and structural developments in the country, was released under the theme Unlocking the Potential of Malawi’s Mining Sector.

Present at the event was Minister of Mining, Ken Zikhale Ng’oma, who is quoted by MBC TV online as saying, the mining sector has potential and cited minerals such rutile and graphite as key revenue sources.

“These resources provide significant taxation opportunities, but we must enhance infrastructure and regulatory frameworks to maximise benefits,” he is quoted as saying, urging private sector’s collaboration to unlock the industry’s full potential.