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Economist warns against' one-size-fit-all' solutions the IMF and the World Bank to understana the BUSINESS EDITOR political and economic landscape in a particular conomist Dr. country before prescribing Thomas a programme or solution. C hat a gh a I a I a "Many countries have Munthalf on Thursday suffered [and continue cautioned countries, suffering] because of advice from the IMF and the especially developing economies such as World Bank that did not Malawi, against wholesale consider the landscape in adoption of 'one-size-fit- a particular country," said all' solutions offered by the Munthali who is also World Bank and the president of the Economics Association of International Monetary Fund (IMF).路 , Malawi (Ecama). In his contribution Commenting on the during a panel discussion global financial crisis and at a workshop on 'The effects on Malawi, Dr. global crisis and Ronald . Mangani, "'an consequences for Malawi' economics lecturer at the held at Annie's Lodge in University of Malawi's Zomba, Munthali urged Chancellor College in ---~~.AUBREY MCHULU
Zomba, said with fertiliser prices going down and Malawi's level of integration into the global economy, it is possible for the country to come out of the crisis as though there was none at all. Earlier, Mangani said in countries such as Malawi, where development partners finance over 4.0 percent of the budget, pressure to implement some policies come from the IMF and World Bank. He said usually the IMF prescribes an economiC programme which acts as the green light for other donors to give aid to a particular country. Mangani agreed with Munthali, saying in future
the IMF and the World Bank should move away from one-size-fit-all solutions facing poor economies such as Malawi because the landscape is different. Dr. Wilheim Lowenstein, a professor of economics at the Institute of Development Research and Development Policy at Germany's RuhrUniversity Bochum, said the'impact of the global crisis on agro-based economies such as Malawi is reflected in the commodity prices which have fallen. The workshop was held as a cooperative project of the South African-German Centre of Development
Munthali: Many countries have suffered Research and the University of Malawi. It was aimed at discussing the specific effects of the crisis for Malawi. _
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THE NATION
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. THURSD~Y, r,OVEMBER 12 2009
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developments resulted in bad loans and debt defaulting. Lowenstein said rhe impact of the global crisis on agro-based economies such as Malawi is reflected in the commodity prices which have fallen. He said volumes of raw marerials from Malawi to the European Union/China will increase while prices will be lower, largely based on speculation. Malawi relies on tobacco, tea, coffee, groundnurs and couon which make up 90 percent of
her exports. Price crisis in
AUBREYMCHULU BusINEss EDITOR
VVas tV\alav{i affected
as Malawi been affected by the ongoing global financial crisis? j If yes, in what way? And
! if not, what were the ;. contributing factors? What is t..'1eway-forward? 1These are some of the f questions academics and ;' economists sought to find f answers to when they met at Anriie's Lodge in I- Zomba on October 29 this
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\ year to discuss the specific
e.ffects of the crisis for Maiawi during a workshop 'held under the theme The global financial crisis and consequences for Malawi'. The workshop was held as a cooperative project of the South African-German Cenae of Development Research and the University of Malawi (Unima). "Malawi was not immediately affected. The Malawi Stock Exchange,
by the global financial
for example, was not instantly affected but is now being affected through reduced trading of shares, price fall and inactivity on some counters," said Dr. Ephraim Chirwa, a professor' of economics at Unima's Chancellor College in Zomba. He also noted that financial institu tiom in the country are now more cautious in their lending
to the' private sector and individuals to the extent of demanding collateral even for overdraft facilities in some cases. "Commercial banks have also cenaalised their loan decisions. In the past one could easily have their loan processed at branch level but, perhaps due to what happened in the US, head offices are now involved in loan approvals," said Chirwa,
Did the financial crisis hit Malawi? «
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by Edwin Laurent, Commonwealth head of international trade, who told The Nation Business Review in London last month, that effects of the global financial meltdown on poor countries will be far .more pronounced and will last for some time. The first round effects of the global economic crisis have affected copper prices in Zambia, resulting into job losses on the mines. In Malawi, low demand for ·the tobacco' and cotton also
meant low prices for peasant farmers across the country. The World-' B'ank recently projected that foreign direct investment (FDI) to developing countries wiII fall bv an estimated 30 percent'this year while the International Monetary Fund (IMFt-expeds a sharp slmv-down in FDI to about a half of all lowincome countries such as Malawi. During the Zomba workshop, Chancellor College vice-principal Dr. Eston Sambo said there is need to understand the local situation regarding
the global financial crisis. Sambo said he si ts on the boards of the Malawi Environmental Endowment Trust and Mulanje Mountain Conservation Trust, both of which have World Bank funding. He said the two institutions have been affected, losing substantial amount of money. '.'Consequences for Malawi are real. Initiative to build capacity will be vel)' imponant," he said. Dr. Wilhem Lowenstein, a professor of economics at the Institute of Development Research and Develo'pment Policy at Germany's Ruhr-
University Bochum, said due to the interconnection nature of the financial markets, the crisis first caused a credit crunch and spilled over into the real economv with sharp declines i~ "investment trends and employment in rich nations. The financial ensls traces its cause to easy credit, weak understanding and supervision of complex financial instruments in high income countries such as the United States of America. These
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crisis?
noting that in 2008, local commercial banks lent more money to the public senor than the private sector. But Chirwa said Mal,,\"li may, in the long term, be affected by the crisis and that what was imponam is to prepare to minimise the impact. Chirwa's sentiments were in line with remarks
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wbacco and cotton, which put buyers and growers ar daggersdrawn in the past selling season, are some indications of the impa.~t of the crisis. In its assessment of the impact of the financial crisis, the African Development Bank (AfDB) mentions falling demand and Drices for Afriean commodities, declining capital flows and unJ'ulfilied aid pledges to the continent as some of the indicators of the effect of the financial crisis on the continent. .The AfDB said low level of financial integration meant that the continent's economies were relatively isolated from the direct impact of the financial crisis. In his contribution, economist Dr. Thomas ChataghaJaia Munchali cautioned countries, especially developing economies such as Malawi, against wholesale adoption of 'one-size-fit-all' solutions offered by the World Bank and the IME "Many countries have suffered [and continue suffering] because of advice from the IMF and the World Bank that did not consider the landscape in a particular country," said Munthali who is also president of the Economics Association of Malawi (Ecania). - Commenting on the global financial crisis and effects on Malawi, Dr. Ronald Mangani, an economics lecturer at Chancellor Colleae said with feniliser prices going down and Malawi's level of integration into the global economy, it is possible for the country to come out of the crisis as though there was none at all .•