By Benadetta Chiwanda Mia:
The Malawi Confederation of Chambers of Commerce and Industry’s (MCCCI) has said the economic environment remains challenging and is stifling growth chances for businesses.
The economy has in the recent past been characterised by rising inflation, high interest rates, exchange rate volatility and acute forex shortage, which have affected business operations.
In its October Economic and Business Review, MCCCI attributes the problem to sustained high inflation largely driven by rising food prices due to supply constraints.
The chamber also notes that the foreign exchange shortage became particularly severe at the end of September and into October 2024, worsening petrol and diesel fuel scarcity.
“These fuel shortages have caused substantial disruptions in logistics and transportation, severely affecting the movement of raw materials and finished goods. Perishable goods industries, such as milk production, have been hit hard, with delays causing significant losses and wastage,” reads the report.
MCCCI observed that persistent foreign exchange scarcity poses a serious threat to Malawi’s economic growth, projected at a modest 2.3 percent for 2024.
It says businesses are struggling with these constraints, impacting overall economic performance.
Additionally, the MCCCI highlighted that the Reserve Bank of Malawi’s recent decision to raise the Liquidity Reserve Requirement (LRR) to 10 percent for domestic deposits has added pressure on private sector credit, restricting access to essential funds needed for business expansion and operations.
MCCCI has also expressed concern over the decline in private sector credit, noting that this trend indicates a tightening of funds available to the private sector, which could significantly slow down economic activity, prompting businesses to scale back on production, hiring and investment.
Recent data show a noticeable decline in the annual growth rate of private sector credit, which fell from 26.8 percent in August to 24.2 percent in September 2024—a contraction of approximately 2.6 percentage points.
Nonetheless, the annual growth rate for September 2024 exceeded the 20.4 percent recorded in September 2023.
“For businesses, particularly small and medium-sized enterprises (SME) that heavily depend on bank credit for operations and growth, reduced credit availability hampers their ability to invest in inventory, expand capacity, or fund working capital needs,” it adds.
MCCCI maintains a cautious outlook, with inflationary pressures expected to persist through the lean season, adding that rising maize prices could threaten household food security and further erode purchasing power.
It has since recommended a focus on strategies to boost foreign exchange inflows, such as supporting export-oriented industries and enhancing food production, as well as a coordinated approach between fiscal and monetary policies to stabilize the economy.
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