A well-managed economy creates opportunities, and inspires more people to save and invest. It also encourages existing businesses to make new investments, to grow, and expand.
More and well-paying jobs are created, the private sector hires more people, and citizens prosper.
A robust private sector and prospering citizens pay the much-needed taxes which the government can then use to provide quality social services such as the health, education, road networks to ease transport, affordable housing, stable and affordable electric power.
All these factors contribute to stability, growth, value-addition, the creation of wealth, and the prosperity of citizens. When people prosper, peace, calm, law and order are largely secured.
Unfortunately for Malawi, the economy is broken: there is widespread hardship and suffering, resulting in insecurity at all levels.
Despite tremendous macro-economic successes that the country registered immediately after Independence, Malawi remains poor and getting poorer, its economy is still not diversified, uncompetitive and excessively dependent on agriculture and the infrastructural base made by the Malawi Congress is now dilapidated.
In a publication titled “The Least Developed Countries Report 2016” United Nations Conference on Trade and Development (UNCTAD) has categorized Malawi amongst countries that will only graduate from this list in 2025. The important thing to note is that this group comprises mainly of countries that have experienced civil strife or natural disasters never experienced by Malawi.
For the majority of Malawians, the results of the Democratic Progressive Party (DPP) led government’s mismanagement of the economy and unprecedented tolerance of corruption has worsened their living conditions and economic circumstances.
Malawians are looking in dismay at the DPP government’s failure to curb spiraling corruption and pursue those practicing corruption as evidenced by the feet dragging that has followed completion of the MK577 Billion German government funded audit.
For the vast majority of Malawians, the toxic mixture of the DPP government’s mismanagement, incompetence and corruption over the past few years has resulted in an explosion of suffering:
- Farmers are suffering
- Students are suffering
- Patients are suffering
- Medical practitioners are suffering
- Traders are suffering
- Contractors are suffering
- Civil servants are suffering
- Industries are suffering
- Men are suffering
- Women are suffering
- Children are crying
- Malawians are suffering
Nothing in Malawi is working for the good of the ordinary women, men and children. The DPP government on its part, continues to pretend otherwise and has no clue about how to get our country to work.
The present state of the economy renders Malawi extremely vulnerable to external changes in the terms of trade and to natural calamities. Against this background, the MCP is committed to structural reforms and stabilization policies seen as the recipe for economic recovery.
There is little doubt that our economy needs to be substantially restructured to adequately provide for the ever-growing population. The MCP Government will, in close collaboration with our development partners, implement economic reforms in a way that will improve the welfare of the people of Malawi.
We need to become self-reliant, competitive and able to manage our public and private sectors diligently.
The overall goal of MCP Government has always been to uplift the living standards of people which have since 1994, plummeted dramatically by providing a fair and competitive business-friendly and people-friendly economy which will promote economic growth and prosperity.
The MCP is determined to narrow the widening rift between the rich and the poor in the country. Even though the overriding concern is to ensure rapid economic growth, the MCP fully recognizes that the benefits of growth do not automatically trickle down to everyone for the full satisfaction of basic needs and prosperous life. Thus the MCP’s economic policies will be specifically designed to achieve equitable development, which ensures that all groups in society enjoy the fruits of development.
The MCP Government will introduce corruption-free social safety nets specifically targeted at the vulnerable groups so as to enable them participate in the mainstream of the development process in the form of complimentary health and education programmes.
To achieve growth and development, the MCP will create a policy environment that will promote rapid economic growth within the context of viable balance of payments positions and relative price stability.
Private sector involvement in economic activities will be specifically encouraged within a sound fiscal, monetary and investment policy framework.
1.1 Economic Governance
A robust economy exists when there is financial discipline. MCP will ensure that the financial discipline that existed prior to 1994 is revived. Consequently, MCP will push for new legislation to give the Anti-corruption Bureau independence, power to investigate and enough resources so that corruption in Statutory Corperations (eg ESCOM, MERA, NRA, ADMARD, IPC, MEC), as well as cashgate, be history.
1.2 Fiscal Policy
The MCP’s fiscal policy will be based on the realization that the revenue base is very small and has drastically shrunk over the years since 1994.
The MCP Government will aim at growth oriented fiscal policy focusing on providing an enabling environment for economic growth, trade and investment. A balanced budget is sine quo nom for accelerated growth and development.
Budget deficits will be curtailed significantly as the MCP Government will restore fiscal discipline and ensure transparency, accountability and value for money in handling government finances. To ensure that growth and development takes place the MCP Government will remove myopic approach to expenditure management by balancing expenditures on both social and economic services.
Fiscal discipline will be ensured through the following policy measures:
(a) Introducing legislation to set a ceiling on the number of cabinet positions after merging a number of related ministries and departments;
(b) Priority in both capital and recurrent expenditure will be given to social sectors such as agriculture, health and education. Public resources will be allocated based on justifiable economic and social needs;
(c) Reviewing fiscal policies that unnecessarily constrain entrepreneurship;
(d) Strengthening administrative and operational capacity of all revenue collecting bodies including the Malawi Revenue Authority. The emphasis of an MCP Government will be on promotion of voluntary compliance by applying rates that the tax paying community will consider reasonable;
(e) Formulation of the budget in consultation with wider sections of the business and civil society to ensure inclusiveness;
(f) Strengthening the expenditure control process in the public service as well as review allocation priorities in order to minimize government borrowing from the central and commercial banks. Excessive government borrowing from domestic financial institutions, clouds out private sector investment and is a sure recipe for high inflation;
(g) Enhance and monitor private sector involvement in sectors such as health, education and transport, which are traditionally considered as the government’s domain so as to ease pressure on increasingly limited government budgets; and
(h) Retiring public domestic debt.
The MCP will further use the Public Financial Management Act to ensure discipline, transparency and prudent management of public resources. In matters of fiscal management, the MCP Government will foster great cooperation with all our development partners. Malawi is part of the global village and can therefore not prosper without the assistance from our development partners in a relationship cemented by mutual trust and confidence. The MCP Government will make use of the valued advice from the international organizations such as the International Monetary Fund (IMF), the World Bank and the United Nations. Bilateral donors will receive due gratitude and cooperation from an MCP government that believes in “contact and dialogue and follow through”.
At the time when the MCP was administering this country before the 1994 wave of political change, Malawi had a tax reform programme, which was championed by consultants from Harvard Business School.
The target at that time was to move the top tax rate to be at 30%. The MCP government will ensure that this tax rate is considered again to achieve fairness when implemented.
The MCP, in realization of the loss of the purchasing power of the Malawi Kwacha, will review the poverty threshold to reduce stress on the Malawians in his range. In addition the MCP will review the threshold from which the top rate tax of 30% will be applied.
MCP is aware that customs rates are prohibitive and encourage tax evasion by importers. The MCP Government will implement a tax regime which will deliver a tax structure with a human face. The MCP believes such a structure will promote wider compliance and hence enhanced revenue collection.
1.4 Monetary Policy
Operations of the Reserve bank are the roots of an economy. Monetary policies are geared to control price levels and to maintain the Malawi Kwacha at a reasonable and acceptable exchange rate as driven by market forces. In a healthy economy, the monetary policy drives fiscal policy. Unfortunately, in Malawi, the opposite is true: the fiscal policy drives the monetary policy. Successive administrations have been violating the independence of the bank as stipulated by the Reserve Bank of Malawi Act by unduly controlling it.
This has, among other things, resulted in the manipulation of monetary policy resulting in inconsistent exchange rates giving rise to shortages of foreign exchange. Despite good inflows of forex from donors, mining and the tobacco sectors, the country has been suffering bad foreign exchange shortages in recent times.
The MCP Government will safeguard the independence of the Reserve Bank. It will review the Reserve Bank of Malawi Act to make it more robust and more restrictive for government to run a loose monetary policy. It will revitalize the Loans Board responsible for ensuring that Government sticks to the statutory limits of borrowing.
1.5 Investment and Savings Growth
Private sector investment, globally, is the key factor that fuels economic growth and development. Unfortunately for Malawi, insufficient and declining levels of private sector investment have been the case, especially in manufacturing, the key tool for economic transformation. Structural and institutional weaknesses have contributed to the near demise of the private sector.
Economic Policy has emphasized demand management rather than enhancing supply side policies. Consequently, productivity has drastically gone down resulting in alarming unemployment levels and eroding the revenue base of the Government.
The current economic policies have failed to provide required social and economic infrastructure such as dependable supply of electricity and water, factory shells and roads for the private sector to flourish.
Lack of transparency in the issuance of investment incentives, absence of well-defined legal and regulatory framework for investment, weak human resource base in all spheres of investment promotion, low savings and lack of a well-defined public/private sector institution to promote constructive and productive dialogue between the two sectors have had negative effects on the growth of the private sector. It is clear from the foregoing that government has lacked capacity and vision to define and implement policies that would enhance the productivity of the Malawi economy through the private sector.
Investment can only be possible if the economy generates sufficient savings and provides the necessary incentives for both domestic and foreign investors. The MCP is well positioned to reverse all these ills and bring back the glory that the private sector used to enjoy. After all, it is the MCP that established the Malawi Investment Promotion Agency (MIPA) with the specific mandate to attract, promote and facilitate both foreign and domestic investment in Malawi.
It is also the MCP that established the Malawi Export Promotion Council (MEPC) to promote Malawi exports abroad but, unfortunately, these very important institutions (MIPA and MEPC) have been crippled by underfunding and personnel mis-posting. To add to this, an unwise decision was made to merge the two institutions ignoring their vital economic and developmental roles.
The MCP Government will ensure that the roles of these two institutions are re-instated and that they are sufficiently strengthened and empowered to carry out their respective mandates for the proper functioning in support of the private sector.
To complement the low domestic savings the country must attract substantial Foreign Direct Investment (FDI). Furthermore, both foreign and domestic investors require sound, functioning and predictable policy environment, an energetic and enterprising people to improve labour productivity, improved conditions of both social and economic infrastructure and a viable financial sector supportive of private sector development efforts that the MCP Government will put in place and implement. In order to fully realize the potential benefits of the reform, the MCP Government will implement the following measures:
(a) Give the MIPA the necessary support and review its mandate to make it more autonomous so that it can fully discharge its mandate of attracting, promoting and facilitating investment;
(b) Provide economic infrastructure, develop and implement rehabilitation and maintenance programmes for economic infrastructure, including roads, telecommunications, utilities and provision of factory shells;
(c) Develop transparent guideline for the provision of investment incentives to both foreign and domestic investors to ensure the maintenance of a competitive investment destination;
(d) Re-orient and link MIPA with foreign missions for aggressive investment and export promotion and marketing;
(e) Invest in human resources development;
(f) Secure investors’ confidence through political stability, maintaining a predictable economic policy environment and eradicating corruption in deeds not just through podium rhetoric;
(g) Implement sound fiscal policies avoiding fiscal deficit and reviewing the level of both foreign and domestic debt that impact negatively on the environment and raise the cost of financing private sector investment;
(h) Encourage cross-border investment particularly in the SADC and COMESA regions as a strategy for export promotion of our traditional exports; and
(i) Encourage the creation of a forum to enhance public and private sector dialogue at the highest level.
The MCP Government will revitalize the private sector and with strategies aimed at attracting, promoting and facilitating both foreign and domestic investment. This will involve the development of the existing market base, identifying additional growth sectors, targeting new modes of investment and developing competitive investment incentive packages.
The MCP Government will work with the private sector and to help in the best possible way so that together we can contribute to the uplifting of the lives of the people of Malawi.
1.6 Budget and Aid Management
Since 1994, the Malawi economy has performed dismally because of poor management of the budget and aid flows. It is particularly important that we put in place sound aid management mechanisms especially that evidence thus far shows a positive relationship between aid management and economic growth.
This is not to say that the MCP supports the culture of dependency that accompanies aid drive. We note though that genuine development must also progressively mean being able to wean the economy from heavy reliance on aid flows while it entails making good use of aid in order to spur sustainable economic growth to climb out of the present economic problems.
There is need for institutional, political and economic reforms that will ensure that aid flows are put to productive use. The MCP realizes that to achieve economic prosperity in the present economic climate, prudent budget and aid management is exceedingly crucial. To improve the management of the budget and foreign aid flows, and MCP Government will:
(a) Delink the Debt and Aid Department (DAD) from the Ministry of Finance and establish a full-fledged and independent Debt and Aid Co-ordination Bureau which can independently monitor compliance to borrowing purposes, borrowing levels, deficits, manage the existing debt and be directly accountable to Malawians via Parliament or an appointed independent body;
(b) Undertake to carry out country-wide pre budget consultations with the civil society and other stakeholders, and timely present and publish the budget for the public to comment on;
(c) Introduce value for money audits;
(d) Publish quarterly government accounts;
(e) Strengthening the role of the Public Accounts committee; and
(f) Aim at balancing the budget by setting a withdrawal target from donor dependence.
1.5 Labour and Employment
Acute land shortage in agro-based economy like Malawi inevitably calls for concerted action on the part of state to create abundant off farm employment opportunities. The rising poverty levels make it a matter of urgency. To achieve laudable economic growth and prosperity, an elected MCP government will create jobs and employment opportunities to cater for an ever-growing labour force. For Instance, the size of the country’s labour force was projected to exceed 5 million by the year 2000.
The MCP Government will implement the following measures:
(a) Reorganizing the activities of Labour Offices in order to adequately meet the growing demands of an ever-expanding labour force;
(b) Supporting small and medium enterprises to generate employment particularly in the rural areas;
(c) Offering attractive incentives to private sector companies that expand and create more job openings without necessarily compromising productivity;
(d) Encouraging links between training institutions and industry to assist in the periodic reviews of curriculum and identification of skills gap;
(e) Periodically review Temporary Employment Permit (TEP) guidelines in consultation with the major stakeholders such as the Malawi Confederation of Chamber of Commerce and Industry. Labour Unions and Employers Association;
(f) Legislating against striker replacement in the public sector; and
(g) Introduce legislation to protect whistleblowers in work places.
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