Minister of Finance Goodall Kayiwonanga Gondwe has been ‘cooking up’ Malawi’s GDP growth rate from 3.2 percent to 5.4 percent to bluff Malawians and the world at large that the country’s economy is track when in fact it is in a sorry state.
New revelations from the IMF, World Bank and highly placed internal sources in the Malawi government indicate that the revered Minister of Finance, Goodall Gondwe, an astute economist, has against evidence from the NSO, Ministry of Finance and the IMF insisted on capping Malawi’s Gross Domestic Product (GDP) growth rate at 7percent.
Ironically, this is 3.8 percent higher than the accurate estimate of 3.2% by the National Accounts and Balance of Payments Technical Committee chaired by the Ministry.
The current projection of 5.4 percent was a compromise by the IMF arrived at reluctantly in order to sign-off Malawi’s programmes.
GDP is the total monetary value of all goods and services produced within a nation’s geographical borders over a specified period. GDP growth rate is a measure of the rate of change of a nation’s GDP from one year to another.
One big question everybody would ask is; why an Honourable man such as Goodall Gondwe who is reputed to be a knowledgeable and respected economist would deliberately misrepresent economic projections?
The reasons are simple. Malawi’s economic problems are a result of this ‘fixing’ of GDP projections.
In principal, when the government submits a higher GDP projection it automatically raises its projections for revenue and this means that higher GDP means government will have a larger tax base from which to collect tax.
This, in turn, means that the government can argue that the Malawi Revenue Authority (MRA) will have higher revenue collections than would be the case with a lower GDP.
But why would praiseworthy experienced economist Goodall Gondwe want to register higher, but false GDP growth rate which creates the impression that there will be higher tax revenues than can be collected?
The reason is that higher revenues then allow government to have a bigger budget, higher public spending projections. This allows the government to submit to parliament a higher budget on the basis that the government will be able to raise the revenue to finance it.
One would ask how then does the government get to finance such a high budget when it cannot raise the revenue it claims will be collected. The tactic is simple and that is the key source of Malawi’s economic problems.
When the Budget is passed on the basis of these high but unachievable revenues, the government then proceeds to borrow from the central bank, the Reserve Bank. This is called domestic borrowing and it means printing money which then increases inflation (putting more money in the economy when the volume of goods and services has not increased)
This results into higher prices since there is more money to buy fewer goods. Remember since the GDP is lower than that submitted, there are fewer goods and services to purchase but more money and so prices go up.
The other problem created is a higher exchange rate.
Again, since there is more kwacha in the economy chasing fewer forex the price of forex increases making the cost of imports higher.
But what compels a supposedly rational man like Hon Goodall Gondwe to make this horrific choice. As an aging politician in deteriorating health who still wants to remain relevant to the politics in Malawi, Goodall has to make sure government has money to spend and embezzle.
This is how he does it.
Once the loan money is paid to treasury from the Reserve Bank to meet this gap created from lower MRA collections, it is all allocated to recurrent expenditures and not development expenditures.
The recurrent expenditure is money for government operations, salaries, travel, offices, state residences and vehicles and this money does not go to development expenditure.
Finance Minister Goodall Gondwe has calculatingly chosen to feed his political masters at the expense of the entire Malawi nation in order to keep his job by parading as an economic genius.
Evidence of this inaccurate and misleading GDP Growth Rate projection can be seen in the IMF Letter of Intent which Nyasa Times has seen, in which the current finance minister Goodall Gondwe, also commends ousted former President Joyce Banda for introducing a flexible exchange rate regime.
“…Important to these ends will be preservation of our flexible exchange rate regime and automatic fuel pricing mechanism, both of which have served us well since 2012…” Goodall Gondwe is quoted as saying in part in the IMF letter of intent.
But most disturbing is Goodall Gondwe’s admission that the government despite its trumped up rhetoric about civil service reform has so far just undertaken 22 of the 66 reforms needed to fix IFMIS, the system used for Castigate.
The Letter is co-signed by Governor Charles Chuka who presided over the Reserve bank during the infamous Castigate Scandal.
A policy and socio-economic analyst, McBride Nkhalamba based in Sandton, South Africa recently told an international policy and economic conference which was held in Johannesburg, South Africa that it was unfortunate that Malawi is living a lie by inflating figures saying doing so was uncalled for and a cardinal sin to economic development.
“Malawi is on a fast lane to economic debacle and at the rate we are going, if nothing is done, Malawians must brace for tougher times. Malawi has so many vibrant young economists who if given a chance can help in turning things around but we seem to be too comfortable with the ‘old guards’ who have run of steam and can no longer offer anything to our modern economic needs,” said Nkhalamba.
Goodall Gondwe who has both worked for both the IMF and World Bank has twice served as finance minister in the two Mutharika brothers’ DPP governments.
It appears that the old man is no longer good as he used to be or what he has known to be, in fact he is needs to change his name from ‘Goodall’ to ‘Badall’ because he is now so bad as an economist and it seems he has lost his mojo. He is now more of a political millstone and a spent-force and too bad for the country and all the hard working citizens.
- Peter Kalombodza is a social and economic commentator based in the Malawian capital, Lilongwe.
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