Malawi Economics

img_50325We have learned to browse the local papers at least once a week, and search the web, to gain a deeper understanding of Malawi, its people and its culture. They seema bit too factual for a blog post so end up here on the “About Malawi” page. We hope they give you the opportunity to get to know the context in which we serve.

As Malawi tries to bootstrap itself upwards into a more developed economy it has done so largely through government spending. In turn government spending has been obtained from foreign donors and from income tax on the ‘wealthy’ in Malawi. However, in the last year the foreign donors have removed their money from the goverment as a response to big corruption scandals – slashing government budget by 40% overnight.

This brings several consequences …

MRA

The first consequence is even more reliance on income tax that is levied on a relatively small number of Malawians. Income tax at 15% is levied on income above 20,000 MwK (24 GBP) a month and 30% on earnings above 25,000 MwK. There are no exact figures but it is estimated that this means only 15% of the Malawi population are paying income tax (its 45% in the UK) and contribute 50% of the domestic collections of the Malawi Revenue Authority! What a balancing act for the Malawi government if it is to improve the lot of all 16M Malawians from an income tax base of only 2.5M ‘wealthy’!

Gov Spend

The second consequence is that the government’s budget per head gets even smaller in absolute terms compared to western nations. For example, the Malawi government has approx 65 GBP per person to spend in a year compared to approx 9,000 GBP per person in the UK. This makes for some tough prioritisation by government!

trader

The third consequence is that – despite slashing its budget – the government ends up finding itself borrowing more in the commercial financial markets. This has probably contributed to the slump in the value of the Malawi Kwacha which in turn hits the ordinary Malawian through increase inflation (approx 25% a year) brought about by more expensive imports and more expensive petrol. And it also ends up pricing private businesses out of the already limited credit market in Maalawi as government demand for loans drives up interest rates. This makes it even more difficult for the small entrepeneurs who Malawi needs if it is to climb out of poverty.

If nothing else all this should demonstrate to us the complexity of the systemic social and economic issues faced by Malawi, and that there will be no simple magic bullit to resolve any of this.

  • Pray for Malawi, its people, and its leaders, as it faces such monumental material challenges.
  • Pray that it will have leaders who are commited to serving the people rather than being served by them.
  • Pray for early rains this year, and an early harvest, that the hunger that hovers on the horizon might be aleviated as early as possible.
  • Pray that in all this economic and material gloom the Malawi churches will experience a true revival of the Holy Spirit, such that Malawi would have a taste of the Kingdom to come and become more like the nation God would have it be.