Chairperson of the Budget Committee of Parliament, Ron Chiphiko has argued that Malawi economy is ailing and not on recovery, backing accusations made by leader of opposition Lazarus Chakwera against the Peter Mutharika government over “deception” on economy, that the Kwacha currency appreciation is being manipulated.
Chiphiko told parliament his Committee is of the view that domestic conditions in the economic and natural realm were such that economy will continue to be less buoyant than the Finance Minister Goodall Gondwe painted it to be.
“Although the inflation rate has edged downwards, it remains high. Similarly, interest rates remain high ranging from 35 and 40 per cent,” he said.
In addition, he said excessive government domestic borrowing due to repost ways and means and advances at the Reserve Bank of Malawi has also sustained the high ranging rates and further crowded out private sector investment.
“Mr Speaker, Sir, and distinguished Members, there is evidence that this micro-economic situation is discouraging private sector investment and dampening household consumption.
“Recent data shows that, in the past year, Malawi annual fuel consumption has been reduced by almost 15 to 20 per cent. Many borrowers are unable to service their loans and hence in default as evident from the increased bank repossessing property from borrowers. But even when the property is put on the market, it is taking too long to be disposed of and it is disposed of in a distress at below market prices,” Chiphiko told the House.
He pointed out that the recent natural disasters that beset Malawi have just aggravated an already dire situation seriously, reducing agricultural output and total economic activity in the country.
“Given that Malawi’s inflation is driven more by food prices than anything else, in time of food shortages, will translate into food inflation,” said Chiphiko, insisting his Committee does not share Gondwe’s optimism that inflation will reduce significantly.
In his budget statement, Gondwe indicated that the Malawi economy should grow at the rate in the excess of seven per cent.
But Chiphiko said given on the economic environment that he had pointed, the Committee fails to understand how Malawi can grow above average in the region.
“Much of the 2015/2016 will rely on agriculture output of 2014/2015. If agriculture, which accounts for 35 per cent of GDP, reduces by 27 per cent, the country has to import maize and the Committee does not see where the sources of growth lie for the next nine months, at least between now and the harvest time,” he said.
Chiphiko said the Budget Committee “strongly think” that the budget was formulated “under wrong assumptions. “
He said: “By saying so, we are not in any way suggesting any ill will on our part, but the problem is, if you do not get your micro-economic assumptions right, the whole budget literally falls off.”
MPs are deliberating on the 2015/16 budget statement.
During the sitting, Chakwera, who is also Malawi Congress Party (MCP) president, told parliament that poverty levels remain “unacceptably high” in Malawi trashing assertions by President Mutharika that Malawi economy is doing very well.
“I challenge our economic experts who are often at home making economic analysis from the comfort of their air conditioned offices in their high rise buildings to come down from their ivory towers to go to the villages and ask farmers in Namwera, Bolero, and Nambuma whether they are experiencing the so called improved economy,” said Chakwera, trashing Mutharika address which claimed economic mini-boom.
“Lets us not lie to our people, this economy is not doing well,” said Chakwera, a former Assemblies of God church leader.
Commenting on the import cover, Chakwera said companies and individuals “due to the poor performance of the economy”, do not have the purchasing power to enable them to import raw materials for the industries hence the reduced capacity for private sector to produce.Follow and Subscribe Nyasa TV :