The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) has said it expects a tough business environment in the second half of 2024.
This is according to a presentation on First Half of 2024 Economic Review: Current Trends and Outlook for The Second Half delivered during MCCCI Chapter meeting in Lilongwe Tuesday.
Delivering the presentation, MCCCI Director of Business Environment Madalitso Kazembe said the chamber expects government to continue borrowing domestically as pressure on the public purse increases.
According to Kazembe, domestic borrowing is expected to surpass the planned K1.28 trillion in the 2024-25 national budget, a development that will mount pressure on inflation and interest rates.
She added that inflation will remain high in the second half of 2024 due to the onset of the food lean season as well as the mismatch between monetary policy and fiscal policy.
“Pressure [is likely] to increase on exchange rate as scarcity of forex continues and widening margin between official and unofficial rates.
“Despite the just-ended tobacco marketing season, foreign exchange earnings are insufficient to offset the shortage of foreign exchange needed for business operations,” Kazembe said.
According to MCCCI, moving forward, the government must be committed to reforms to stabilise the economy.
The reforms include strengthening debt management, improving fiscal governance and encouraging domestic production and exports.
The chamber has since urged the private sector to be innovative and build resilience.
“[Policymakers must] assess risks, costs and benefits and be willing to make bold decisions.
“[Also] formulate bold strategic plans using economic models that takes into account economic volatility and uncertainty,” Kazembe added.
She further urged the enterprises to restructure businesses strategically to turn current economic impediment s into possible opportunities.
“Businesses should explore new domestic and foreign markets,” she said.
In its latest Malawi Economic Monitor, the World Bank said urgent actions and sustained reforms are required to restore macroeconomic stability, protect most vulnerable households and enhance growth
According to the bank, key objectives include restoring macroeconomic stability.
“Planned macro-fiscal reforms must be fully implemented and sustained over time. Key objectives include fiscal consolidation in line with the ECF targets, progress on external debt restructuring while containing the growth of domestic borrowing, accumulating reserves by moving forward with increased exchange-rate flexibility, and controlling inflation by limiting the growth of the money supply and refraining from further monetary financing of the fiscal deficit.
“[Also think about] increasing production and exports: With climate-induced natural disasters and extreme weather events likely to intensify, promoting sustainable farming practices and investing in irrigation systems will be essential to build resilience.
“Moreover, reforming the system of price controls will be necessary to alleviate distortions that discourage production and exports. Finally, given the government’s limited resources, public investment must focus on the most productive projects and reflect a careful analysis of likely costs and benefits,” the bank said.
MCCCI hosted the second Chapter Meeting of 2024 for the Central Region to update its membership in the region on recent developments in the economy.
In an interview, Secretary to the Treasury Betchani Tchereni said for the country to continue running developmental projects, it needs to borrow money.
However, he was quick to point out that how much will be borrowed will be seen at the end of the year.
“That the economy is passing through difficult times everyone can see. However, we need concerted efforts to develop the economy. For example, the government relies on the private sector to produce for the export market to generate foreign exchange,” Tchereni said.
In a recent interview, Reserve Bank of Malawi Governor Wilson Banda highlighted that the tobacco season has raked in increased volumes of foreign exchange.
He said speculation on the market remains a big challenge.
“Ideally, the foreign exchange rate should be very stable. But what is happening in our market is that they speculate too much,” Banda said.
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