Pathways to prosperity in rural Malawi

By most accounts, rural Malawi lacked dynamism in the past 15 years. Growth was mostly volatile, in large part due to unstable macroeconomic fundamentals evidenced by high inflation, fiscal deficits, and high interest rates. Poverty remained high and its pace of reduction slow compared with better performers in Sub-Saharan Africa such as Ethiopia, Ghana, Rwanda, and Uganda. Malawi’s rural poor faced significant challenges in consistently securing enough food. Notwithstanding the improvements in non-income dimensions of poverty, monetary poverty in rural Malawi remains pervasive. Improving agricultural productivity is necessary to improve the welfare of rural households. Agriculture constitutes the backbone of the Malawian economy, contributing more than 30 percent of gross domestic product (GDP0 and employing 85 percent of the workforce. The accumulated evidence suggests three proximate causes. First, agricultural productivity is low, especially among the poor and when compared with other low-income countries in Sub-Saharan Africa. Second, opportunities for nonfarm self-employment (NFSE) are limited, and the returns to such activities are low, especially for the poor. Third, the most prominent safety net programs have low impacts or reduced coverage of the poor population. Accelerating the demographic transition will boost poverty reduction.