Ntata: Economic reforms to transform Malawi

Any close and honest analysis of the late president Bingu waMutharika’s vision for Malawi comes to one evident conclusion. BinguwaMutharika’s major preoccupation for Malawi was food security. This was to be achieved through the Farm Input Subsidy Program (FISP) and the Green Belt initiative.

President Mutharika shows the reforms report submitted by the commissioners . - Pic by Stanley Makuti

President Mutharika shows the reforms report submitted by the commissioners . – Pic by Stanley Makuti

Of course his ancillary ambition was to improve the country’s competitiveness in international trade through the Shire-Zambezi Waterway, and to some extent, stimulate small to medium scale project based lending by establishing a development bank. His fondest dream, that of food security was attained and sustained for a few years. The other aspects of his vision, however, never saw the light of day.

When Bingu wa Mutharika died in 2012, his popularity was at its lowest point. Bingu left a leadership legacy that has attracted all the negative adjectives one can give a leader: intolerant, autocratic, arrogant, and corrupt, to mention a few. Despite this, I still consider the Late President BinguWaMutharika to be a visionary, and the most decisive President of our democratic dispensation. Bingu had a clear economic agenda and constantly thought about ways of attaining it. Sometimes the method let him down, but that is inevitable even to geniuses.

If one were asked about President Joyce Banda’s vision, it would still largely include food security as pursued by Bingu – FISP – and a new addition of free and decent housing for the underprivileged-something not too surprising coming from a president who considers herself a serious philanthropist. On the economic front, Joyce Banda did not pretend to know too much so she quickly consulted economic experts that were opposed to Bingu’s policies. When she understood what needed to be done, she just reversed Bingu’s decisions and implemented the ones that he did not want to implement.

Some of Banda’s most important decisions were the initial large devaluation of the Kwacha and the leverage given to allow it to respond to market forces more freely, and the implementation of automaticity of fuel pricing which allows for an upward or downward adjustment of the In Bond Landed Cost (IBLC) as dictated by either international price changes or by exchange rate fluctuations, or both with five percent as a trigger band in both directions. These decisions were important in normalizing fuel supplies to the country and correcting a weak external positionby allowing a more rapid accumulation of international reserves.

Joyce Banda was voted out of office in the heavily disputed May 2014 elections and I will not offer any debate on that issue here because that’s not the focus of this article.

With just an addition of community technical colleges, President Peter Mutharika’s vision is not difficult to decode. The young Mutharika’s idea for Malawi simply inherits his brother’s FISP vision and merely replaces Joyce Banda’s Mudzi Transformation Trust with what he has called the“decent and affordable housing project” under the Ministry of Lands. The idea is that the change of name will create the illusion of difference. I am sure we all know, however, that they have the same objectives and the same delivery mode.

THE PROBLEM

Judging from Malawi’s currenteconomic situation, it is inevitable to conclude that Peter Mutharika has taken Malawi to lower economic depths than it has ever been, and must takes the first spot inasfar as killing the country’s hopes of economic revival are concerned. Like all others before him, Mutharika puts the blame on his predecessor for leaving empty coffers and causing the suspension of budget support by Malawi’s cooperating partners. The only trump card he has, it seems, is to order arrests, at times politically motivated, of presumed big fish in cashgate with the hope that donors would return with budget support. As we all know, that particular strategy has not exactly worked because Mutharika is yet to tackle the dazzling K577 billion casghate under the watch of his late brother, a government he was part and parcel of.

Many commentators, such as the Civil Society, Oppositions leaders and leading private sector playershave already noticed that Mutharika is struggling to lead the nation, describing his leadership as clueless in as far as plans to jump-start the economy are concerned.

Nevertheless, as I listen to what the opposition parties and other critics have to offer, it is impossible to figure out what alternative plan they have for the country. The reason is simple. They do not have one. It is easy to criticize; but to suggest a way forward and to advance alternative proposals takes a different kind of criticism.

Listening to much of the rhetoric, I have come to the conclusionthat if most of the so-called critics were to get into government now, their priority would be to pursue the K577 billion cashgate that happened under DPP rule and arrest those they merely believe should be connected to the looting. Their only reasoning seems to be that once we show the western world that we are pursuing corrupt elements in past regimes, economic aid and budget support will return and the Malawian economy will suddenly get back on track. My fellow Malawians, if you hear any leader, or would be leader sound like that just know that they are themselves as clueless as Peter Mutharika.

When you listen to these self-made economic experts and commentators, the very people who are supposed to have the right ideas, the level of cluelessness actually becomes more frightening. Almost all of them know the long list of the economic problems the country is facing and they are happy to rewrite the same list every day. When it comes to providing alternative remedy, you hear statements like “the country needs a long term vision”, and “Capital Hill needs to come up with a stimulus package”, There are others that even say that “perhaps the country needs to embark on quantitative easing.”

THE SOLUTIONS IN A NUTSHELL

TheREFORM TO TRANSFORM MOVEMENTthat we are rolling out in the country has identified public sector solvency as the main problem that government needs to address in its budget. In pursuit of that objective, key considerations should be whether the budget is able to create the necessary fiscal space without further compromising macroeconomic stability.

Since fiscal space is the gap between the current level of projected expenditure and the maximum level of expenditures that we can undertake without impairing solvency, any budget allocation decision should factor both balance sheet solvency considerations and fiscal deficit with their short-term impact on aggregate demand. Given that we are in a cyclical downturn, we must identify and undertake high return-hence solvency enhancing expenditure. I will demystify this highly technical jargon very soon.

Given our past record of public financial management and policy credibility amidst a highly credit constrained government, skepticism is abound on Malawi’s ability to create fiscal space. That is normal. However, we need to assess the available options. In order of priority, our assessment indicates that they include

(1)identifying areas of rationalization and generation of fiscal savings through improved expenditure efficiency and elimination of wastage,

(2) raising revenues from both tax and non-tax sources through base broadening and tax administration measures and design of appropriate incentive-compatible schemes, and

(3) assessing the sustainability of our debt to consider whether we are severely credit constrained or not.

When people are getting angry over a bloated delegation to New York, for instance, it is because we have just missed a chance of realizing fiscal savings that can be put to more productive use. Given the estimated tax effort level, there would be uncertainty as to whether there can be any significant improvements in tax revenue collections.

Our considered view is that with a proper incentive-compatible framework, tax revenues can be enhanced and with vigilant checks and balances, more non-tax revenue can find its way into the public purse. We thus challenge that it is possible through these options to release at least five percent of our GDP into the fiscal space.

In calibrating fiscal targets, we must remember that a fiscal deficit is not necessarily a bad thing provided that it does not create additional new debt without corresponding solvency enhancing targeted spending and therefore placing a further burden on our debt service obligations.

In relation to GDP, the government wage bill poses serious sustainability challenges going forward and will ultimately have a negative impact on any solvency corrective measures that we will undertake if not addressed decisively. There are no short cuts and almost every option we choose will have a social cost. Though painful, however,these are difficult decisions that are absolutely necessary and must be taken boldly. To put it bluntly, there will be need to downsize in the medium term and these efforts must begin in earnest.

mproving public sector solvency will involve huge sacrifices that will have to be made by everybody. If we still expect excellent health services without paying some modest user fees to at least defray costs at the margin, then we are living in dreamland. If we expect world-class education services and standards without some minimum cost to beneficiaries, then we should forget about any possible turnaround for the country’s economy.

Even our infrastructure development projects must first be thoroughly scrutinized instead of being pushed on the basis of political expediency. Right now we have to ask ourselves difficult questions as to whether building houses for the under-privileged is something we can afford now and whether that expenditure enhances solvency immediately. We have to ask whether we can continue with FISP at current subsidized levels or raise the level of contribution by beneficiaries to somewhere around fifty percent and use the savings on targeted high return expenditures that will further enhance public sector solvency. We have to ask ourselves honestly whether community colleges are a development priority.

CONCLUSION

During the mid-year budget review session of Parliament, if Finance Minister GoodallGondwe does not tell us that he is trying to create fiscal space and the means of doing so, just know that cluelessness has become a self-fulfilling prophesy and that the country is indeed doomed. If Gondwe does not tell us exactly how much fiscal space he will create and the priority areas of spending, government mediocrity would have been epitomized. If he cannot create fiscal space of at least ten percent of GDP, then we are available to offer our expertise and assistance.

Fellow Malawians, as a people, we need to think outside the box and REFORM TO TRANSFORM. If we must appreciate and sing praises for begging leaders, and our hearts cannot aspire for much more than the life of a beggar nation, then we must ask ourselves why we fought for independence at all.With the REFORM TO TRANSFORM initiative, we’re talking about an idea that changes the way we think, including how we all think that begging and running a country on foreign aid deserves applause and appreciation. We do not subscribe to that kind of slave mentality, and the Spirit of REFORM TO TRANSFORM aims to make Malawi self reliant, not jumping up and down because our Presidents know how to beg.

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26 thoughts on “Ntata: Economic reforms to transform Malawi”

  1. Tili Chenene says:

    The article is a Mixed bag especially from someone with a different Body language like the author

  2. Concerned Citizen says:

    What an article it is. Well articulated. Great one Mr. Ntata. koma inu aJK ndinu ambuzi

  3. Nankungwi says:

    Ntata if you weren’t so anti Mutharika you would be able to reason. If a man has come up with reforms in his govt and they seem to be the only saving grace for the economy how on earth are able to call him clue less?

    Tell you what I think you are clueess yourself untill you change your mind set to a more objective constructive format and stop this personal vendetta against a president who is just trying to make an impossible situation work!

    For a lawyer you leave a lot to be desired

  4. FootSoldier says:

    As long as you include programmes that will and already have brought debilitating dependence, economically-not-viable programmes like Shire-Zambezi Waterway you can not be serious with your Reform -to Transform! because these are obviously not programmes that can grow our economy and resuscitate our still-born statehood.

  5. malawi view says:

    komano zakuti Gondwe akapanda kunena/kupanga chakuti..fiscal space,.ndiye kuti alibe clue yobwezeletsera economy back to line ndi fallacy. is that the only way? ngati uli ndi one solution,one only then ur expertise is questionable,perhaps we don’t need it. in shot u can b a worst finance minister ever. try to love malawi,gud idears, not one,wil come. u r not yet patriotic kkkk

  6. Nankununkha sadzimva says:

    Well written article and with substance. Keep it up! Wamsala adaona nkhondo!

  7. leoplant says:

    akubweramo pang’ono pang’ono. abweramo ndithu nanga si aBingu anat Boma ndi Boma Nde Wina nkumat kut nfwee nfwee kut chan

  8. Thakolambuzi says:

    4 remove fuel allowances.1000liters/month=K732600*20 cabnet minsters*12=?

  9. bwangandu says:

    nice and balanced article. keep it up even though the advice given to both government and opposition will never taken on board

  10. Chidzukulu says:

    This article was not written by ntata. Don’t be confused. Someone somewhere has done it for ntata

  11. JK says:

    My boy Ntata… This article would have made a bit of sense if you didn’t try to show off your academic prowess by ‘like you even mentioned’ displaying some economic jargon to confuse the rest of us readers you want to show off to.. You should have written in simple plain language which would have clearly sent the message… The Dausi type days are gone boss!!
    Another point I clearly think you missed is on our economic advisors.. They never said influx of donor aid is the solution.. But every solution has a root and thus for a country like Malawi!! Let’s not kid ourselves.. Donors are the platform we need to help us realize all our economic dreams.. We can’t start dreaming our realizing economic freedom when we don’t have enough in the fiscus for our daily needs!! Economies like Egypt still get donor money and this fallacy that Malawi can do without them is like dreaming about floating in the air and showing us a you-tube clip to provide us with proof that you floated!!!

  12. The real ujeni says:

    Great article, those against it are just jealousy and dunderheads possibly. Economics is theory, there is no one solution. If it was Malawi which like to follow IMF medicine to the later would be developed country by now.

  13. Alex Likoswe says:

    Garbage garbage out

  14. Nyachikadzi says:

    Walemba ndi a Ntata izi? Ayi alembetsa kwina kwake. It is a very good article worth considering. Osati zina amalemba zija.

  15. Yoda says:

    This is a badly written article, the sentences are loaded leaving the reader confused. It fails to communicate what the reader was trying to say.

    From the little I gathered the writer has little understanding of what it takes to actually grow GDP of a country.

    Finally the whole article smacks of an individual with a narcissistic condition. Garbage pretty much

  16. nachisale says:

    What is the article really about? Kusowa zolembatu uku. Fotseki.

  17. Frank says:

    Excellent views Mr. Mtata, they seem to be too idealistic and extreme in nature to be grasped by any Malawian raised in our society smeared with favouritism, corruption and high illiteracy levels. I understand you have spent quiet sometime in advance capitalised economies where the isssue of making and managing money is the definition of their culture. If you were to integrate your point of views into the cultural system of Malawi so that the nation should grow with these economic ethics what would have been your entry point? the Education system or sensitization programmes in our villages and communities? For how long do you think would it take such a programme to be fully adopted into the cultural system of Malawians? I am of the view that capitalism system begun more than 2000 years ago and the western world have just begun enjoying the improvement in social welfare under this system in less than 60 years ago. As for me I think Malawi is not ready to be independent as the nation has proven itself overtime that it always outside the scope of global capitalism movement(globalisation) and it is not ready to take any steps to integrate itself in such a system. As for me independence means that the nation is ready to stand and fight for its share in the global capitalism system and not being a begger. Since we are failing let the clever Chinese who more than understood the system and beat the western style in 30 years come and recolonize our poor country for 10 years. Within these 10 years under the Chinese leadership your brilliant views maybe internalised in both our daily life and institutional life. Maybe their presence and leadership will open the eyes of poor and lazy Malawian like me as to what it means to transform a nation from a practical point of view.

  18. mbuzi says:

    Malawi is a doomed country with clueless leadership, am not surprised here, we have a long way to go, NTATA u are right we need a revolution whereby we will support a leader not just because we share a tribal boundary,village, TA among others but because of his brilliance and innovations in changing the way we are governed in this country

  19. BigMan says:

    Ntata- Surely you are an empty tin with too much time on your miserable unemployed hands.

  20. kagalu says:

    JUST CONTINUE DOING YOUR LAW STUFF NTATA AND LEAVE THE ECONOMY STUFF TO PEOPLE WHO KNOW IT BEST,THA IS MY ADVICE,OTHERWISE AM AFRAID THAT NEXT TIME I HEAR ABOUT YOU,YOU WOULD BE IN MENTAL ASYLUM .TA

  21. mboba says:

    Very good piece Mr. Ntata.

  22. The Analyst says:

    Ntata is funny, have you noted good people?

    Today you are a lawyer, tomorrow an economist. You cant be a judge of your own rape case. Its not possible!

    Today you are in government and do nothing but eat. Tomorrow you are out of government and hungry, and then try to do something? Good people lets, let us learn to offer advice or help while we can.

    Today you grab the neck of your father and almost choke him, tomorrow you offer advice and make an appeal to the same father to take your ideas on board of how best the family affairs should be handled and expect the father to lend you an ear? You expect the DPP-led Government to take your ideas on board yet it is the same government you are trying to bomb-blow? Ntata you are the total definition of a confused idiot.

    “Consider the postage stamp: its usefulness consists in the ability to stick to one thing till it gets there.” – Josh Billings.

    If you want to fight the government, wear the face of a savage and fight it to the tooth. But in your case you don’t need to wear that face for you already have it. If you want to help the government show your worth by behaving normally and looking normal.

    Some of your ideas are good. Very good and practical. But no one is listening, not even the Finance Minister whose ear you now grab and shout into for attention, because you have broken his eardrum and (those of his associates) when you consistently barter their heads and grab their necks in the name of freedom of speech.

    There is no middle ground in mathematics: its either you know the answer or you don’t. Even in religion, its either you are for God or the Devil. Choose and be one thing.

  23. Peter27 says:

    The poor do not have problems with paying tax. The problem is when the gvt creates itself immunity from austerity measures and looks the other ways when money is being wasted. Look at what Bowler did, k30million car but you are telling the poor people that you can employ nurses because you have no money, REALLY?

  24. onyonyo says:

    I don’t take this very serious because he was legal advisor to bingu wa mutharika and he kept quite but now he is vocal why? To hell with your agenda.

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