MALAWIANS: ARE WE REALLY THAT DUMB?

MALAWI: Reading the article by Ephraim Munthali, who talks to the RBM Governor, does not inspire hope when authorities believe our survival as a nation is solely in the hands of the IMF and other donors, writes Kingsley Jassi.

For starters, Malawi joined the IMF in 1965 and has had 16 programmes since then. Malawi is still impoverished 57 years later, with donors providing 95 per cent of public health funding.

Even the 2006 $1 billion debt relief has grown, 16 years later, to a public debt of 63 per cent of GDP, or $404 debt per capita, up from $73.

With all that borrowed money, the economy only generates $1 billion in exports per year, yet we need $3.5 billion for imports and expect donors to cover the rest? No! Let us have some dignity for a change.

We must first correct our politics before we can conduct proper economics. We've been practising our shallowness and myopia for far too long.

For once, I thought we had a sane leadership that would do the right thing and start moving in the direction of Rwanda.

Any growth rate less than 7% will not get Malawi anywhere near middle-income status by 2030, as envisioned in Malawi 2063, and this will necessitate a lot of digging and austerity.

Everything starts with the national budget. You can't put more money into areas that require much of it to be converted into dollars and then spend it on non-export oriented activities and expect economic stability.

That is completely insane.

Allow me to explain. The AIP has caused more harm than good. We've spent more money in the last two years to import more fertiliser, which we give to people who don't farm commercially. Where do we think those funds will come from? And how do we make amends?

By the way, the AIP is one of the primary causes of our current currency woes. Then we issued local bonds to raise billions of kwachas for road, sports, and government building construction, among other things.

We also know that many of the materials are imported and that the foreign contractors require payment in dollars.

Where do these funds come from?

Then there are numerous other expenditure lines that make no economic sense, particularly now that we are sailing in turbulence.

Then, generous allowances for officers give them more money to spend, primarily on imported goods. These budget lines are now numerous.

Consider the 10,000 security officer houses; we require all of the steel and iron sheets imported with dollars. It is advantageous when a project is foreign-financed because it comes with its own currency.

All of this unnecessary pressure on the kwacha comes as the country still hasn't recovered from the Kayerekera Uranium closure, which cost the country up to $400 million in annual export earnings.

In 2014, the country made $1.47 billion in exports; seven years later, after we stopped exporting uranium, and with increased import demand, we can only make $1 billion.

No alternative means strategy, and we expected no impact? Do we have a strategy?

This is a crisis that can only be solved through industrial means. Before we start building beautiful roads and 20-story skyscrapers, we need to increase agricultural and mining production.

Strengthen social cash transfer and Comsip initiatives to assist the poor, and use AIP funds to boost industrial and export-oriented agricultural production. This will generate a lot of revenue and forex, which will accelerate industry growth.

Increasing the State House budget by K7 billion at this time is absurd. It's as simple as that: in a crisis, you don't increase consumer spending. Implement austerity measures. Reduce the budget. Invest in high-return areas. Aid industries in increasing output and exports.

Many businesses with value addition and export potential are underfunded, and the government can set up funding or tax incentives to help these businesses create more jobs and forex.

These are practical steps that must be taken, rather than the usual podium pronouncements or NEEF fraud initiatives.

Now that the authorities have run out of ideas for dealing with the current situation, all they can think of is bringing back the donor or dying. Shame!

The Reserve Bank appears to be sweating profusely. When currency pressures increased, affecting strategic imports, they tried a $250 million revolving trade credit facility.

Later, a currency swapping arrangement was tried, but it did not solve the problem. They rolled it over into a $450 million medium-term debt in June 2020, hoping for some relief. That, too, was brief.

Another $210 million debt tranche was rolled over to the medium-term in September 2021 to provide some breathing room. The situation worsens, and we now only have 1.5 months of import cover, not even enough to import drugs.

Fertilizer imports have dropped by more than 70%, and the industry says it cannot take the risk of importing without price guarantees. Another food crisis is on the way.

Even NOCMA had to borrow $60 million for the next three months' fuel imports. Nobody knows what happens three months later.

Authorities are now banking on $350 million in concessional loans withheld by donors who are unable to release them in the absence of an IMF programme.

All of the desperate forex measures have pushed commercial loans to 30 per cent of total foreign public debt; how will we pay it back if all we do is wait for the ECF?

Now, the government intends to establish a debt retirement fund, with new fuel levies serving as the fund's revenue source.

This is a clear indication that whatever we borrowed all that money for had little to do with revenue and export growth, which is a major source of concern for our budgeting.

Whether or not we receive the ECF, the bottom line is that we are not doing our economics correctly. With all of these ongoing economic woes and a worsening currency crisis, where do we go from here?

Are we truly that stupid?