Malawi’s poverty levelsworsening—World Bank – Nation Online

The country’s poverty situation worsened during the Covid-19 period with about 72 out of 100 Malawians now living under the poverty line of less than $2.15 (K3 764) per day, latest World Bank figures show.

The Bank’s macro-poverty outlook for October 2024 is attributing this to various factors including food insecurity which spanned three years, trade distortions, widening fiscal and current account deficits and an unsustainable debt burden.

Reads the report: “El Niño induced poor harvest exacerbates food insecurity, which is worsened by higher food prices given that households increasingly rely on markets to complement their own food production.

“As a result, efforts to reduce poverty are falling short, and the proportion of people living on less than $2.15 per day is still above 71 percent in 2024, which is higher than during the Covid-19 pandemic.”

The bank warned that nearly 30 percent of the population is expected to face crisis-level food insecurity during the lean season and poverty is expected to reach 72 percent of the population by the end of 2024.

Among others, according to the report, the low economic growth in Malawi which for over two years has remained below population growth resulted in a decline of per capita Gross Domestic Product (GDP).

“Multiple price distortions, including an overvalued official exchange rate, remain prevalent in the economy and have resulted in widespread resource misallocation and complicated efforts toward macroeconomic stabilisation,” it says.

Meanwhile, the agricultural sector which employs most of the workforce, and continues to rely primarily on rain-fed production, faces declining productivity and real income.

In an interview, Centre for Social Concern (CfSC) economic governance programme officer Agnes Nyirongo said the World Bank’s report shows the actual situation which is in harmony with its findings.

Nyirongo said: “Our findings, in fact, show that if we factor in issues like access to clean water, among others, the percentage of people living below poverty levels is reaching 78.3 percent in the country which is even higher than the bank’s projection.

“Poverty and food insecurity are expected to increase in 2024 amid this challenging economic environment making the country more susceptible to economic and climatic shocks, and further exacerbating socio-economic challenges.”

According to Nyirongo, among other options CfSC is suggesting increased safety nets or cash transfer initiatives to the vulnerable population which is currently at acute food shortage because that is the most needed intervention.

In a separate interview, Malawi Economic Justice Network executive director Bertha Phiri said the situation is worrisome because the country is still failing to significantly improve revenue mobilisation to efficiently fund the national budget.

“Our main challenge is that our efforts to broaden the tax base have been limited to PAYE which actually brings in little. If we manage to broaden corporate tax I believe we would have improved our revenue base and ensure we have resources for poverty alleviation,” Phiri said.

In its recommendations, the World Bank’s report said the outlook is subject to significant downside risks, including continued fiscal slippages, which could entrench macroeconomic instability.

“Failure to address external imbalances may continue to result in input shortages. Upside risks include faster-than-expected development of the mining sector, an increase in non-debt creating flows, especially grants to the budget, and a rapid conclusion of debt-restructuring negotiations,” it said.

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