Faculty of Commerce – Management Studies Department

Master of Business Administration (MBA)

Business Economics End of Semester Examination

Blantyre and Lilongwe Campuses

Date: 6th March 2023

Instructions

a) You are required to attempt all the five (5) questions in this examination.

b) This is an open book examination where consultation of academic materials is

allowed.

c) Time allowed for this examination is 6 hours. You will submit at or before 14:30
hours (3pm).

d) This is a problem-solving examination. More points will be earned for providing

solutions in line with economic thought.

e) You may submit a printed document or handwritten. All submissions however will be
on a hard copy.

f) Maximum obtainable marks are indicated at the end of each question.

Question One
(a) The National Planning Commission released its Annual Progress Report (2021-2022)
tracing the Malawi Implementation Plan (MIP)-1. The report is daunting, giving a
much more hopeless situation for the country’s economy. However, the Minister of
Finance presented a budget which had high expectations of many people, hop[ping
that through it, the economy would be shocked enough to reverse the worsening
indicators. The supply-side in part5ivular were on the radar as to whether the budget
would indeed provide some sacrifices. However, as traditional and standard the
budget is always, the budget seem stale.

(i) Provide a policy outline of Malawi’s demand-side and supply-side economic

agenda and evaluate how such policies may help revive your industry (Hint: The
World Bank’s “Malawi Economic Monitor”, December, 2022; and The
2023/2024 Budget Statement in Parliament by Minister of Finance)
{20 Marks}
(ii) Assess the link between Industrial and Trade Policy in enhancing macroeconomic
stability in Malawi {6 Marks}
(b) Using appropriate tools of analysis, discuss the assertion that “the foreign exchange
challenges faced in Malawi can only be solved by the government”.
{4 Marks}
{Total Marks 30}

Question Two
Fredrick Hayeck once wrote that:
“I don’t believe we shall ever have good money again before we take it out of the hands of
government. We can’t take it violently out of the hands of government. All we can do is by
some sly, roundabout way introduce something they can’t stop.” He further Worried that the
high inflation of the 1970s in Western countries could not be tackled by central banks
because of political constraints, Hayek argued that money-issuing should be opened to
market forces and the government monopoly on the provision of means of exchange should
be abolished.
In this way, Hayek envisioned a system of private monies where the forces of competition
would induce banks to provide a stable means of exchange.
(a) Discuss any two economic problems faced by Malawi in general and your industry in
particular which can be solved by the adoption of cryptocurrency? Should Malawi
adopt the Kwacha? (8 Marks)
(b) While Central Bank Digital Currency (CBDC) may be the solution to the future, some
have argued that it is not an absolute answer. Provide any four challenges faced by
central banks in the creation and rolling out of CBDC across the globe?
(8 Marks)
{Total Marks 16}

Question Three
Some economists have lamented that the Fiscal Policy strategies in Malawi do not work. This
renders the efforts of government worthless as the expenditures simply go down the drain
without inducing economic growth and development. Some of the economists however,
argue that it is not necessarily the fiscal policy which is failing to uplift the economy but
rather the related industrial and monetary policy.
(a) Identify any four notable fiscal policy strategies Malawi has attempted to use the past
20 years (4 Marks)
(b) Using appropriate tools of analysis, evaluate the effectiveness of fiscal policy in
solving the triple problems of poverty, inequality and unemployment in Malawi the
past 20 years (6 Marks)
(c) Monetary policy in Malawi does not have proper transmission mechanism so as to
deal with the prevalence of poverty. If the Monetary Policy Committee of the Reserve
Bank of Malawi decides to increase the policy rate, show, through a flow chart, the
expected transmission mechanism in poverty eradication efforts.
(8 Marks)
Question Four
The Reserve Bank of Malawi is mandated to provide macroeconomic stability in the country
by dealing with inflation rate. We have seen, however, that the past year has not been easy for
the bank. Inflation has been on the rise.
(a) The Reserve Bank of Malawi seem to be losing the fight against inflationary
pressures. Some have argued that because of the monetarist strand believing that it is
a monetary problem. Do you agree to this assertion? {Hint: Provide an analysis of at
least four major causes of inflation in Malawi}. (7 Marks)
(b) Prof Mangani in his presentation to the Monetary Policy Conference of 2022 argued
that “where the RBM is not undertaking a developmental state responsibility and
focusing on stability alone, its role is becoming defunct”. What changes, to the
Reserve Bank of Malawi Act, if at all, need to be undertaken to foster economic
growth and development. (5 Marks)
(c) The banking industry in Malawi is highly competitive, do you agree? Demonstrate
your view using your knowledge of market structures. (4 Marks)
{Total Marks 16}

Question Five

There was ululation and jubilation in the corridors of the Ministry of Finance building at
Capital Hill. The IMF had approved a Rapid Credit Facility (RCF) for Malawi amounting to
about USD88 Million. This brought some sigh of relief. We were told that discussions for a
bigge r Extended Credit Facility were at an advanced stage. The challenges of the trade
balance would be things of the past.
(a) Provide a treatise of the mandates of the IMF and the World Bank as they relate to
Malawi? (6 Marks)
(b) Discuss the cons and Prons of the IMF facilities on the economy of Malawi in general
and your line of business in particular (5 Marks)
The neoliberal economic thought led by the International Monetary Fund has suggested that
the Malawi economy can transform if the authorities will apply tighter monetary policy
stance and cut on debt. There are also suggestions that the authorities must allow for flexible
exchange rates to allow for export competitiveness and curbing inflationary pressure. To
what extent do you agree with these conclusions and conditionalities?
(9 Marks)

…………………………Good luck…………………………