It is very rare that this column starts with congratulating the President Peter Mutharika, the Minister of Finance, Economic Planning and Development Goodall Gondwe and the Governor of the Reserve Bank of Malawi Charles Chuka on anything. This time around the President, Gondwe, Chuka and the Monetary Policy Committee (MPC) deserve to be congratulated.
The Nutcracker argued last week that the whole Buy Malawi Strategy was being held to ransom by the high cost of capital in the country. It is, therefore, important to applaud the decision of the Monetary Policy Committee (MPC). The MPC released a statement at the end of its meeting of the March 23 to 24 2017 and announced to the Malawi nation that “after considering the disinflation process in the recent past and inflation outlook, the MPC decided to reduce the Policy Rate (PR) by two percentage points to 22 percent, and maintain Liquidity Reserve Requirement (LRR) at 7.5 percent.
It is now up to the commercial nanks and the business community to take the bull by the horn and start to move the manufacturing capacity upwards. Some industry gurus will still complain that perhaps a two-percentage point reduction is not good enough but as far as The Nutcracker is concerned, this is the right trajectory towards recovery. In fact, last week was rather unique in the economic arena as far as good news is concerned as it was
also the same week that the International Monetary Fund (IMF) declared that Malawi was on track at the end of the ninth and final review under the Extended Credit Facility (ECF) arrangement.
The journey to economic recovery will be cut short if the authorities do not address the underlying structural constraints. Mutharika’s Democratic Progressive Party-led (DPP) government will complete three years of its five-year term in May. The difficulties facing the nation show that the President’s tenure has not has been smooth. Despite the favourable rains, instability in the supply of electricity has persisted. So many deadlines have been given to mark the end of darkness across the country but none of the deadlines has been upheld. The state of roads remains poor, dangerous and treacherous. People see the decrepit state of roads as a symbol of failure by the government. Crumbling nationalroads constitute an eyesore and sources of accidents that continue to claim the lives of citizens.
The economy is improving but is still in bad shape. Public hospitals are either non-existent or they are ill-equipped and lack qualified medical staff, two years down the line graduates from the class of 2015 Malawi College of Health Sciences remain unemployed. It is, therefore, not surprising that with this state of affairs, the political leaders and the affluent will continue to go on medical pilgrimage to overseas countries, draining the country’s hard-earned foreign exchange reserves while the voters who have no political or economic power suffer the consequences of the decisions of the authorities.
To be fair, these problems preceded Mutharika’s government and were compounded by the Cashgate. However, they have remained with us because previous governments paid little or no attention to them. Nevertheless, Mutharika and the cabinet must find solutions to these problems because they were elected to solve problems, not to whinge about the scale of problems facing the nation and the impact of the Cashgate on their ability to deliver on their promises.
An economy in coma remains Mutharika’s greatest nightmare as the country approaches the 2019 elections. There is the problem of rebuilding an economy destroyed over a period of 20 years of mindless government by profligate members of the previous administrations. However, if the President is unable to fix the economy as quickly as possible, everyone will draw conclusions about the government’s capacity to govern. Right from the beginning, senior government officials had promised that the best was yet to come. Unfortunately, under the current circumstances, there is no proof whatsoever to show that the suffering by a large majority of the population would end soon or that high prices of commodities would drop sharply before long.
Across the country, there is a general feeling that businesses have stalled and nothing is moving. Businesses cannot afford to borrow at the profit suffocating interest rates hovering around 40 percent. That is why the news from the MPC is sweet melody. This could be the elusive stimulus that the government desperately needs to kick-start the economy and to assuage people’s anger. The question remains how long it would take for the government to find solutions to the remaining problems that have continued to impair people’s lives.
Right from the time Mutharika’s government was inaugurated, there had been a consistent catchphrase used by senior officials to shift blame to the previous People’s Party (PP) government, and to excuse its inability to rise to the expectations of the people. The most common refrain was that endemic corruption dubbed Cashgate and economic mismanagement by previous PP governments effectively combined to stifle Mutharika’s plans to hit the ground running. After nearly three years of this chorus line, only a few citizens are still interested in listening to this less edifying fault-finding by the DPP government officials. An effective government takes responsibility for the state of affairs in the country both positive and negative. It does not engage in fault-finding or in manufacturing excuses to justify lack of action. So once again congratulations!
Leave a Reply