LILONGWE, June 25, 2021—Low levels of access to electricity in Malawi, high internet prices, unpredictable connectivity, the high cost of smart devices and lack of digital skills are hampering a potential of $ 189 million in additional GDP and $ 33 million in tax revenue per year, according to the World Bank’s latest report in Malawi. Economic Monitor (MEM).
The 13th edition of the MEM, Invest in digital transformation, says the government has laid the essential foundations for public digital platforms with a relatively well-developed digital infrastructure. However, connectivity remains unpredictable and expensive for many people, contributing to the persistence of gender disparities and between rural and urban areas in the access and use of digital technology.
The MEM offers avenues that will help the government improve the enabling environment for the growth and prosperity of the digital economy in Malawi. This includes the deployment of digital financial services in rural areas by developing broadband and financial infrastructure. In addition, there is a need to increase the affordability of smart devices and services, and regulatory fees should be purely related to cost recovery.
In addition, new public-private partnerships can help drive digital transformation and demand, by developing links with regional and global incubators and accelerators. Digital skills and entrepreneurship skills need to be strengthened, as well as links between government, universities and the private sector to co-organize ICT programs.
“The development of Malawi’s digital economy will diversify and enhance economic growth, job creation and innovation. Digital technologies can help reduce the cost of economic and social transactions for businesses, individuals and the public sector. They can also help improve safety nets, public service delivery and transparency for better budget management and better management of future crises ”, said Hugh Riddell, World Bank Country Director for Malawi.
Malawi’s economic growth is expected to reach 2.8% in 2021 thanks to good weather and the Affordable Inputs Program (AIP) which supports a strong maize crop. However, to 2022 and beyond, continued universal fertilizer subsidies are unlikely to lead to a further increase in maize production, and they will not help diversify growth. Instead, the AIP will deplete fiscal space and divert resources from much-needed investments in economic diversification. In addition, a sustainable economic recovery is threatened by high levels of debt and continued public spending in favor of consumption at the expense of essential investments.
Therefore, Malawi needs to implement policies to strengthen and diversify growth while reducing domestic borrowing. It must improve growth by 5% and more to increase incomes and employment, as well as to reduce the growing burden of domestic debt.
The government should continue current efforts to contain the COVID-19 pandemic to reduce vulnerability to future waves. It should also reduce high budget deficits and domestic debt to create a basis for macroeconomic stability and growth. Finally, the analysis highlights the need to promote diversification and growth to increase incomes and incomes, and to invest in crisis-responsive social protection systems that can help prepare for future crises.
MEM provides a biannual analysis of economic and structural development issues in Malawi.