Mpasu weighs-in on Malawi economy: Time to rely on trade not aid

Former Commerce and Industry Minister Sam Mpasu says the only way Malawi can rid itself of the forex troubles that have crippled the country is to promote a vibrant manufacturing industry.

Malawi is bleeding profusely from a lack of forex which has resulted in acute shortages of fuel, which in turn has had a ripple effect, the most evident being the escalating cost of living.

Mpasu, who is an economist by training, said in an exclusive interview with Nyasa Times that  the underlying problem of forex is structural in the sense that there has not been a deliberate political will to review government policies for the benefit of local manufacturers and export development.

“So, one, the end result is that Malawi is relying too much on donor support although the donors have plainly told us to rely on trade and not aid.

Mpasu:

“And two, because of lack of local manufacturing, there is no input substitution. We are exporting things that we can easily manufacture, for instance kaunjika (second-hand clothers).This country can make its own dresses and clothes because we grow cotton in abundance,” he said.

The former Speaker of Parliament, who served various ministrial portfolios in the UDF government, said the third dimension is that Malawi talks about exports but does not talk about producing for exports.

“There is no deliberate effort to produce certain products for particular markets. The exports that this country is relying on are all commodities. We export tobacco in its raw form so that others may refine it for us and import is back to us. All the sugar that we export is for the trade protocol. And the tea is sold at Lime Auction Floors.

“We have to move away from export commodities. Of course, we have now expanded to mining and rare earth but these are still commodities. We need to promote local manufacturing and, in the process, you create thousands and thousands of jobs. And when you do that, you expand the base for government revenues,” he notes.

Mpasu says there is no solution in sight as long as the country continues to import toothpicks while it produces and exports tonnes of timber.

He observes that the long-term solution is to review policies and make it possible to manufacture products here than to import.

“It’s uneconomical to manufacture anything in Malawi because it is undermined by cheaper imports. If government can’t solve that problem, then this country will always rely on donors.”

Mpasu called on the political leadership to make an effort to understand the problem at hand.

“We have to have presidents who understand the importance of the economy. If they don’t, they should get ministers who understand. We have to have a government that knows what is wrong and implements policies that right the wrongs.”

Trade not aid

On the decision by the government to devalue the Kwacha and float it against the US dollar, Mpasu said the Joyce Banda administration had no choice.

“As long as we rely on donor hand-outs, then we have very little options,” he said. “The heart of the matter is that you don’t have enough exchange.”

Since the currency was devalued by a third in May, it’s slumped 26 percent against the dollar, making it the worst- performing unit in Africa. That’s boosted inflation in the southern African nation to 33 percent in November from 30.6 percent in the previous month and prompted the central bank to raise its benchmark interest rate by 4 percentage points to 25 percent on Dec. 4.

However, Mpasu noted that there were two mistakes that the government committed in relation to the devaluation.

“They announced the devaluation before they had made corrective measures. And secondly, they should have floated the currency within a certain band and not let it float freely.”

Mpasu also challenged government to figure out ways in which the country can wean itself from donor dependency.

“Aid is charity. The donors are tired of supporting us. They have been doing it for 50 years and we ought to do something on our own. When will we grow up?” he questioned.

Consumer groups are planning nationwide protests on Jan. 17 against soaring costs and to force the government to reverse the currency devaluation.

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