Amid concerns that the country’s fiscal and monetary policies are misaligned, economic experts and businesses have urged the government to align the policies to create a conducive environment for economic growth.
The views come on the bank of concerns that the expansionary fiscal policy the Ministry of Finance and Economic Affairs continues to implement undercuts the effectiveness of the tight monetary policy stance by the Reserve Bank of Malawi.
Speaking in an interview on Wednesday, Economics Association of Malawi vice-president Bertha Bangara-Chikadza said the central government must implement a robust fiscal consolidation strategy anchored on increasing revenue and reducing expenditure to minimise deficits and reduce debt of accumulation.
“The underlying assumption is that reducing the national debt will ease pressure on the government to borrow from commercial banks and, by extension, prevent the central bank from introducing new money into the system sooner than usual,” she said.
Urges govt to implement a robust fiscal strategy: Bangara-Chikadza
In June last year, the central bank raised the policy rate from 22 percent to 24 percent to contain inflation and to deter consumptive borrowing.
On the other hand, Ministry of Finance and Economic Affairs continues to borrow heavily from commercial banks, widening the fiscal deficit.
Economic analyst and researcher Exley Silumbu urged the central government to align its fiscal policy stance to the monetary policy to avoid slippages and misalignments.
He said: “The central government is pursuing an expansionary fiscal policy to raise aggregate demand in the market when the central bank is implementing a tight monetary policy to reduce aggregate demand. In the end, the policies nullified each other.”
Black Indigenous Businesses Network president Kettie Kamwangala said the high policy rate has raised the cost of capital and raised the cost of borrowing for small and medium enterprises.
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