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BUSINESS

Participants pose fora group photograph during the workshop

Economist warns against' one-size-fit-all' solutionsAUBREY MCHULUBUSINESS EDITOR

conomist Dr.ThomasC hat a gh a I a I a

Munthalf on Thursdaycautioned countries,especially developingeconomies such asMalawi, against wholesaleadoption of 'one-size-fit­all' solutions offered by theWorld Bank and theInternational MonetaryFund (IMF).· ,

In his contributionduring a panel discussionat a workshop on 'Theglobal crisis andconsequences for Malawi'held at Annie's Lodge inZomba, Munthali urged---~~.-

the IMF and the WorldBank to understana thepolitical and economiclandscape in a particularcountry before prescribinga programme or solution.

"Many countries havesuffered [and continuesuffering] because of advicefrom the IMF and theWorld Bank that did notconsider the landscape ina particular country," saidMunthali who is alsopresident of theEconomics Association ofMalawi (Ecama).

Commenting on theglobal financial crisis andeffects on Malawi, Dr.Ronald . Mangani, "'aneconomics lecturer at theUniversity of Malawi'sChancellor College in

Zomba, said with fertiliserprices going down andMalawi's level ofintegration into the globaleconomy, it is possible forthe country to come out ofthe crisis as though therewas none at all.

Earlier, Mangani said incountries such as Malawi,where developmentpartners finance over 4.0percent of the budget,pressure to implementsome policies come fromthe IMF and World Bank.

He said usually the IMFprescribes an economiCprogramme which acts asthe green light for otherdonors to give aid to aparticular country.

Mangani agreed withMunthali, saying in future

the IMF and the WorldBank should move awayfrom one-size-fit-allsolutions facing pooreconomies such as Malawibecause the landscape isdifferent.

Dr. WilheimLowenstein, a professor ofeconomics at the Instituteof Development Researchand Development Policy atGermany's Ruhr­University Bochum, saidthe'impact of the globalcrisis on agro-basedeconomies such as Malawiis reflected in thecommodity prices whichhave fallen.

The workshop was heldas a cooperative project ofthe South African-GermanCentre of Development

Munthali: Manycountries have suffered

Research and theUniversity of Malawi. Itwas aimed at discussingthe specific effects of thecrisis for Malawi. _

developments resulted in badloans and debt defaulting.

Lowenstein said rhe impact ofthe global crisis on agro-basedeconomies such as Malawi isreflected in the commodityprices which have fallen. Hesaid volumes of raw marerialsfrom Malawi to the EuropeanUnion/China will increasewhile prices will be lower,largely based on speculation.

Malawi relies on tobacco, tea,coffee, groundnurs and couonwhich make up 90 percent ofher exports. Price crisis inwbacco and cotton, which putbuyers and growers ar daggers­drawn in the past sellingseason, are some indications ofthe impa.~t of the crisis.

In its assessment of the

impact of the financial crisis, theAfrican Development Bank(AfDB) mentions fallingdemand and Drices for Afrieancommodities, declining capitalflows and unJ'ulfilied aid pledgesto the continent as some of theindicators of the effect of thefinancial crisis on thecontinent.

.The AfDB said low level offinancial integration meant thatthe continent's economies wererelatively isolated from thedirect impact of the financialcrisis.

In his contribution,economist Dr. ThomasChataghaJaia Munchalicautioned countries, especiallydeveloping economies such asMalawi, against wholesaleadoption of 'one-size-fit-all'solutions offered by the WorldBank and the IME

"Many countries have suffered[and continue suffering] becauseof advice from the IMF and theWorld Bank that did not considerthe landscape in a particularcountry," said Munthali who isalso president of the EconomicsAssociation of Malawi (Ecania).- Commenting on the global

financial crisis and effects onMalawi, Dr. Ronald Mangani, aneconomics lecturer at ChancellorColleae said with feniliser pricesgoing down and Malawi's levelof integration into the globaleconomy, it is possible for thecountry to come out of thecrisis as though there was noneat all .•

THE NATION. THURSD~Y, r,OVEMBER 12 2009

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unscathed

noting that in 2008, localcommercial banks lentmore money to the publicsenor than the privatesector.

But Chirwa said Mal,,\"limay, in the long term, beaffected by the crisis andthat what was imponamis to prepare to minimisethe impact.

Chirwa's sentimentswere in line with remarks

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to the' private sector andindividuals to the extentof demanding collateraleven for overdraft facilitiesin some cases.

"Commercial bankshave also cenaalised theirloan decisions. In the pastone could easily have theirloan processed at branchlevel but, perhaps due towhat happened in the US,head offices are nowinvolved in loanapprovals," said Chirwa,

University Bochum, saiddue to theinterconnection nature ofthe financial markets, thecrisis first caused a creditcrunch and spilled overinto the real economvwith sharp declines i~"investment trends andemployment in richnations.

The financial enslstraces its cause to easycredit, weakunderstanding andsupervision of complexfinancial instruments inhigh income countriessuch as the United Statesof America. These

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for example, was notinstantly affected but isnow being affectedthrough reduced tradingof shares, price fall andinactivity on somecounters," said Dr.Ephraim Chirwa, aprofessor' of economics atUnima's ChancellorCollege in Zomba.

He also noted thatfinancial institu tiom inthe country are now morecautious in their lending

the global financial crisis.Sambo said he si ts on

the boards of the MalawiEnvironmentalEndowment Trust andMulanje MountainConservation Trust, bothof which have World Bankfunding. He said the twoinstitutions have beenaffected, losing substantialamount of money.

'.'Consequences forMalawi are real. Initiative

to build capacity will bevel)' imponant," he said.

Dr. Wilhem Lowenstein,a professor of economics atthe Institute of

Development Research andDevelo'pment Policy atGermany's Ruhr-

VVas tV\alav{i affected by the global financial crisis?e.ffects of the crisis forMaiawi during a workshop'held under the theme Theglobal financial crisis andconsequences forMalawi'. The workshopwas held as a cooperativeproject of the SouthAfrican-German Cenae ofDevelopment Researchand the University ofMalawi (Unima).

"Malawi was notimmediately affected. TheMalawi Stock Exchange,

meant low prices forpeasant farmers acrossthe country.

The World-' B'ankrecently projected thatforeign direct investment(FDI) to developingcountries wiII fall bv anestimated 30 percent'thisyear while theInternational MonetaryFund (IMFt-expeds asharp slmv-down in FDIto about a half of all low­income countries such asMalawi.

During the Zombaworkshop, ChancellorCollege vice-principal Dr.Eston Sambo said there isneed to understand the

local situation regarding

by Edwin Laurent,Commonwealth head ofinternational trade, whotold The Nation BusinessReview in London lastmonth, that effects of theglobal financial melt­down on poor countrieswill be far .morepronounced and will lastfor some time.

The first round effectsof the global economiccrisis have affected copperprices in Zambia,resulting into job losseson the mines. In Malawi,low demand for ·thetobacco' and cotton also

Did the financial crisis hit Malawi?« BUSINESS 1

AUBREYMCHULUBusINEss EDITOR

as Malawi beenaffected by theongoing globalfinancial crisis?

j If yes, in what way? And

! if not, what were the;. contributing factors?I What is t..'1eway-forward?

1- These are some of thef questions academics and;' economists sought to findf answers to when they metI at Anriie's Lodge inI- Zomba on October 29 this

\ year to discuss the specific