Gadama calls for urgent reforms in Mw’s economy

Economist and senior Democratic Progressive Party (DPP) official, Dr. Paul Gadama, has expressed concern over the worsening economic situation in Malawi, which is characterized by persistently high inflation.

Gadama, in his analysis shared with us on Saturday, describes the economic situation Malawians are going through as deeply troubling, particularly against the backdrop of ongoing fuel and foreign exchange crises.

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He said the existing monetary policy stance is clearly inadequate to address the severity of the challenges and fails to provide the necessary support for the economic recovery the country desperately needs, citing the relentless rise in inflation, especially in food prices, exposes the failure of current supply-side interventions.

Gadama added that despite the Monetary Policy Committee’s (MPC) recommendation to maintain the policy rate and liquidity requirements, these measures are insufficient to tackle the root causes of food shortages and supply chain disruptions.

“The lack of targeted efforts to boost agricultural productivity and improve supply chain efficiency is a glaring oversight, allowing inflationary pressures to persist unchecked. In addition to this, high fuel prices continue to exacerbate inflationary pressures, impacting not only transportation but also production costs across multiple sectors.

“This creates a vicious cycle where rising costs are passed on to consumers, further entrenching inflationary expectations. The failure to address the fuel crisis effectively demonstrates a lack of strategic planning and urgency in tackling one of the primary drivers of inflation,” he said.

On foreign exchange shortages, Gadama stated that the acute demand for foreign currency, driven by imports and debt servicing, is placing unsustainable pressure on the local currency, with the resulting depreciation is increasing import costs, particularly for essential goods, which further fuels inflation and erodes purchasing power.

According to him, the inability to stabilize the foreign exchange market reflects a broader failure in managing macroeconomic fundamentals.

Turning to the ineffectiveness of monetary policy alone, Gadama said the MPC’s decision to maintain a high policy rate, while aimed at controlling inflation, is a narrow and insufficient response to the crisis, warning that monetary policy alone cannot address structural issues such as food deficits and currency instability.

“The absence of complementary fiscal and structural policies to enhance food production, improve energy access, and stabilize the currency highlights a lack of coordination and foresight in policymaking,” he said.

In his analysis on the social and economic consequences of the prolonged high inflation, Gadama said this is having devastating social and economic consequences, disproportionately affecting lower-income households.

He said the rising food and fuel prices are pushing more people into poverty and increasing the risk of social unrest.

“The government’s failure to mitigate these effects is not only an economic failure but also a moral one, as it neglects the most vulnerable segments of society. This calls for holistic approach to tackling the problem. The current approach to tackling inflation is fragmented and reactive.

“A comprehensive, multi-faceted strategy is urgently needed, yet there is little evidence of such an approach being implemented. Strategic investments in agriculture, energy, and foreign exchange management are critical, but these require coordinated efforts between the government, private sector, and international partners. The lack of collaboration and long-term planning is undermining efforts to build a more resilient economy,” he said.

In his conclusion, Gadama disclosed that the persistently high inflation in Malawi, compounded by the fuel and foreign exchange crises, exposes the inadequacy of the current monetary policy stance.

He said the MPC’s measures, while well-intentioned, are insufficient to address the root causes of supply-side constraints, fuel price volatility, and foreign exchange shortages. The government’s failure to adopt a more integrated and holistic approach, combining monetary, fiscal, and structural reforms, is prolonging the crisis and jeopardizing economic stability.

“Without immediate and decisive action, the risks of prolonged inflation, social unrest, and economic stagnation will only intensify, further undermining the country’s prospects for recovery,” thus Gadama concluded his analysis.