Kachaje: Inflation, the “Bureaucratic Robber”

Persistent high inflation is a serious “crime against humanity” that an insensitive and uncaring government can inflict on its own people. When inflation remains stubbornly high over a long period, even those that are financially prudent and save money diligently become victims of a “bureaucratic robbery”.inflation

 Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. Inflation means a sustained increase in the aggregate or general price level in an economy and an increase in the cost of living.Simply put, “inflation means that your money won’t buy as much today as it could yesterday.”

 

Let’s say that with K1,000 in January 2015, you could buy five loaves of bread. But come January 2016, the same K1,000 can buys you just three loaves of bread; this means you have been “robbed” of the purchasing power to buy two extra loaves of bread. You might have saved K100,000 in January 2015, but with inflation at almost 25%, the real value of your money after a while is just K75,000. Inflation has robbed you of K25,000. This is how cruel and evil inflation is. This is why a caring government must always strive to keep inflation as low as possible. If it doesn’t, then such a government is actually “robbing” its citizens.

But what drives inflation in Malawi? Government over-expenditure, borrowing for consumption and the rising cost of food, especially maize. These are classified as food and non-food inflation. To control inflation, government must desist from spending money it does not have. Can this be done? Is it possible? YES, it can be done.inflation

First of all, as citizens, we must DEMAND that our government only spends on us what we have contributed to the national purse through our taxes and other revenues. It is unpatriotic of us as citizens to expect government to spend on us money we didn’t give it.

There are burdens that government is carrying that should otherwise be on our shoulders as individual citizens. Feeding my children porridge for example is my responsibility not government’s. But providing primary education to my children should be the responsibility of government. Building my own house should be my responsibility. But building a classroom block for my kids should be the responsibility of government.

Unfortunately, with our misunderstood democracy, many of us have obligated our individual responsibilities to government. This gives pressure on government to keep borrowing to provide to the citizens services that cannot be accommodated in the revenue purse. Consequently, government keeps “robbing” us through high inflation. In the end, we are the big losers when government, under pressure to please us, keeps borrowing to do for us what we should have done ourselves.

To bring down inflation therefore, we the citizens must demand that our government should only spend on us what we have given it through taxes and other non-tax revenues. This will require sacrifice on our part and we need to tame our appetite for freebies. Government must only be allowed to borrow for infrastructure developments that have the capacity to facilitate economic growth.

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15 thoughts on “Kachaje: Inflation, the “Bureaucratic Robber””

  1. pido says:

    k577 billion is not a joke. this is the starting point of inflation kwinaku nkothera chabe

  2. International Observer says:

    The article has just touched on a factor contributing to the poor performance of the economy. Given that a number of economists came together (synergy) each one could have his/her input. I thought the meeting organised by PAC was meant to discuss such issues, but alas, some selfish politicians hijacked the aims/objectives of the meeting and begun selling their untried and impractical ideologies.
    Malawians expect too much from government and yet we don’t contribute anything towards its sustenance. If the same government tries to raise money through taxes we complain, if they prop up tuition fees we cry foul and yet we still want first class education, if asked to pay for various services a bit ie paying for treatment in hospitals we are adamant yet we want to see government pharmacies stocked with medicine. The list can go on and on because root causes of our problems are numerous. As long as we refuse to contribute as owners of the country (stakeholders) then we are doomed. Have we already forgotten that during the one party system of government we were told to chant “Ife Tonsee!! BOMA!!” Part of what I am trying to bring out is exactly what the chanting was instilling in us as citizens.

  3. Divine says:

    nice and well put. the government should and must indeed spend on us what we have given it. the way the purchasing power is getting eroded is worry some. but still we can’t blame the government alone but rather as Dr Kachaje has rightly put it, we ourselves have some blame to carry for requiring the government to do for us what we should have done ourselves.

  4. patrick says:

    Inflation is created by exchange rate losses, the main problem is our governor is clueless on how to manage exchange rates. Chuka instead of introducing policies to make kwacha stable. he has made policies which are fuelling kwacha depreciation
    1. Chuka in April 2015 introduced policy where exporters retain 100% of there export proceeds, while eversince colonial rule exporters were only allowed to keep 60% and 40% was being changed into kwacha. This was helping Kwacha stability
    2. Depreciation/Apprecaition limits are subject to 0.25% per day, the appreciation limit of 0.25% should be scrapped, it should be allwoed to appreciate by any perecentage then only FCDA account holders will be scared and will convert there dollars to kwachas instaed of hoarding. Thereby stabilising the kwacha.

    Does Malawi need stable exchange rates then the above 2 must be implemented then only kwacha will find its strength

  5. Thitherward 'wendo says:

    Thank you, Dr Kachaje, for bringing clarity to this issue.

    I have just one tiny nit to pick: in your penultimate paragraph, I think you meant ‘abrogated’, not ‘obligated’.

  6. The Analyst says:

    O……………………………………………………………………………………………………………………………………………………………………………………………………O
    To assertain that Malawi’s inflation is caused by governmment budget deficit is a clear manifestation of not being up-to-date with, hence a careless misrepresentation of recent data . . .

    . . . You can ask any analyst or economist who is up-to-date with empirical research or Malawi’s economic data; you will be told that the exchange rate path is the one which exerts a statistically significant impact on Malawi’s inflation, and not money supply path (which government expenditure is a part).
    . . . This is why the moment the pump price is adjusted on the basis of changes in the exchange rate, prices of good and services immediately and significantly change. This is the reason also why the current freely-floating exchange rate regime is not a good language to tame the inflation with.
    . . . If you are in doubt, just try to wonder (as a starting point) why inflation is still high in Malawi despite lending rates consistently remaining high also?; when the high interest rates are meant to curb the growth in money supply?

    Now, if we parade ourselves in town or newspapers as economists and not do any econometric research or run any single regression equation (since leaving college) or just care to update ourselves with recent studies, we run the risk of telling people lies hence embarrasing not only ourselves, but also those who taught us economics at the university.

    Mphini yobwereza imawala: it helps to do a PhD after MSc!
    O……………………………………………………………………………………………………………………………………………………………………………………………………..O

  7. Chambe says:

    And why is government straggling to finance hospitals and schools adequately?
    Reasons:
    1. We are breeding children at a faster rate such that government can not cope
    2. Our borders are porous such that our Mozambique neighbors are using our resources
    3. Farming maize has become so expensive such that lot of people abandoned it preferring to buy instead which is a cheaper option. Production has surged instead.Thats why besides flooding and poor rains, this has been a problem for a long and will remain so if Government does not think deeper on this.
    4. We import too much for commodities that we could manufacture on our own. There is imbalance of imports and exports such e.g US$1.3b exports vs US$3.5b within a year.There are lot of things revolving around here: down grading of our banks by IMF, world bank and other foreign financial institutions hence devaluation of our currency, debt creation by individuals and governments to foreign banks, government borrowing both locally and foreign to meet the imports demand etc.

    So in agreement with Kachaje, it is better for people to be told in local languages so that they should understand these things. Government MUST be transparent on these issues. Political games should be stopped and political parties spokes persons and SCOs should not deceive our people that by simply changing governments then all will be roses, never. It will take a long time well over 8 years to get these sorted.

  8. LWD says:

    Had just started to appreciate your argument Henry when the article ended abruptly. Perhaps you could expound a couple more examples? otherwise I agree, you make the subject tolerable albeit if not too simplistic!

  9. Tan'gatan'ga says:

    The National Identity cards will fuel further tribal delineations. Do we really need to be identified by our tribes, what for if we are all Malawians.

    Some of us do not even come from TA’s jurisdictions but cities. What is going to be printed on the cards, TA Mzuzu City Mayor?

  10. Elis says:

    thanks Mr Kachaje that now you are talking the truth beyond your political ambitions, we need this to build our nation and from this we can learn how to overcome serious challenges affecting our nation.

  11. Angoni apaphata says:

    Non tax revenue. Does that not mean borrow. Mwabisala pachipandetu apo bwana. Otherwise good article.

  12. Sympathiser says:

    A lesson well delivered. Malawians let’s rise above political, tribal and ethnic background and help ourselves revamp our country. This country is ours, divided we fall together we stand.

  13. levelheaded says:

    I have said it now and again that unless Malawi was a communist country, government is not supposed to provide even our daily food.

    Providing maize in admarc is not government responsibility. Admarc was supposed to be left to traders.

    In Mozambique, Zambia and Zimbabwe you can’t find something like admarc. People know it full well that they are responsible to feed their stomached period.

  14. Nyambi the revolutionary says:

    Kachaje u are now talking.Malawians including opposition leaders please tell the citizenly the truth.Govt has not failed but its malawians who hv failed to feed their children coz of overreliance on rains when they can actually use pails to irrigate their withering maize, build themselves houses and buy their own fertilizer from all yr incomes resulting from perennial streams osamanamizana ai

  15. Master says:

    I have enjoyed your article henry, infact u have that talent which can make even the most dull person in town to understand your points, a great teacher, the problem in Malawi is high iliteracy levels in this country, they will still misunderstand u on what u have written here, but who must demand accountability, transparency from govt? with a country which is too polarised on tribal afilliations, where tribal affiliation is stronger than national afiliation, we have a big problem because malawians dont agree on national issues, they always interpret on tribal inclination regarding any issue, for example if someone is making noise on why govt overspent without a proper explaination on how they spent the money, some fools will start looking at the names of those making that noise where they come from, their tribe, region of origin, whata crazy country that everything is vetted on tribal lienage!!!

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