Side bar to Chifipa’s open letter to Chakwera on IMF Strategy
In offering President Lazarus Chakwera, a 5-straight action plan to win back the confidence of international lenders, such as the International Monetary Fund (IMF), South African-based Malawian chief economist, Chifipa Mhango highlighted several governance and economic environment shortfalls the country is facing.
Chifipa said the Malawi economic environment at a glance “in a way puts Malawi where we are with regard to the IMF four-year extended credit facility” (ECF) — whose talks on a new consideration being put on hold talks until a resolution is made on the Malawi’s debt sustainability situation.
He said Malawi current economic situation has not convinced the global bankers that it can be turned around for the country and have the ability to repay its debt as stipulated in the determination of credit access criterion.
He gave an example of neighbouring Zambia, which he noted has a newly-elected President but IMF “approved a 38-month arrangement under the ECF in an amount equivalent to SDR978.2 million (around US$1.3 billion, or 100% of quota)”.
“The program is based on the Zambian Government indigenous economic reform plan that aims to restore macroeconomic stability and foster higher, more resilient, and more inclusive growth — as quoted from the IMF press release of 31st August 2022.
“Our neighbour Zambia had a convincing story to tell to the IMF,” he continued. “The Zambian Government, through its newly-elected President put their story straight and committed to restoring fiscal sustainability through sustained fiscal adjustment — focusing on eliminating regressive fuel subsidies; enhancing the efficiency of the agricultural subsidy program; and reducing inefficient public investment, as well as domestic revenue mobilization and investing in its people through education, health among others.
“Mr President, our neighbour’s story was not just in a speech but in action. The strengthening of fiscal controls to dealing with wasteful expenditure was the key political will and action of our neighbours’ Zambia, as well as addressing governance and corruption vulnerabilities.
“No matter how brilliant the words are in a speech, IMF looks at your daily actions. The fiscal position and management of the resources before and after becomes imperative.”
Chifipa went on to advise Chakwera some key facts that require his urgent redress that no development lender would be comfortable with, which include:
* Malawi agriculture subsidy programme has demonstrated serious weaknesses and challenges with no convincing solutions, maybe not a good story for the IMF;
* Malawi’s fight against corruption seems to take an alleged politicised approach than a pursuit of justice and rule of law, in which some of those alleged corrupt persons or individuals continue to serve in high or key Government posts, maybe not a good story for the IMF;
* Malawi’s fiscal expenditure surpassing its revenue, and elements of wasteful expenditure and lack of controls in dealing with fiscal mismanagement in Government and its agencies, maybe not a good story for the IMF;
* Malawi’s economic policy position and plans are well articulated through its several policy positions and National Economic Development Plans, however, lack of a fast-paced approach to implementation, maybe not a good story for the IMF;
* Malawi’s appetite to borrow for unproductive expenditure purposes, both externally and domestically rising; with capacity to repay diminishing, as foreign exchange potential to grow is being eroded, maybe not a good story for the IMF; and
* Malawi’s inability to sustain a conducive monetary policy framework; amid rising inflation rate, may not be a good story for the IMF.
“Mr President, Malawi is a country blessed with water resources in the Lakes, rivers and dams, arable land constituting at least 90% of its geographical landscape; beautiful landscapes of Chiweta hills; Nyika plateau; Mulanje mountain; the majestic landscapes of Ku Chawe in Zomba; the Game reserves and National parks of among the best the World can offer; unexploited mineral wealth and, above all, its resilient people that have over the years demonstrated the warm welcoming heart of African people, despite the poverty and hardships they face.
“It is that, which we must take advantage of to progress our beloved country, Malawi,” said Chifipa, while reminding Chakwera that as a leader of the nation, he “is also leaving a legacy behind”.
“As a leader, the choices are the same two — bad or good legacy. As a seasoned economist and Malawi-loving person, with relatives, friends and colleagues across the country, I write to you in good faith, for I have trust in you that as a man of God, the word redeem also dominates your daily vocabulary.
“Mr President, redemption comes through true commitment towards action and not words. The rejection by the IMF for the ECF has got serious implications for Malawi unless alternative solutions are on the table.”
He added having spent 10 years of his career works on reference point in the development lending world to which the IMF is key, “a rejection of the ECF by the IMF sends wrong signals to all lenders, especially when the reasons are publicly known as stipulated in its determination of access criterion”.
“In my last letter address to you on the 10th of January 2022, I did clearly state that: ‘An economy of the size and limited resources of Malawi cannot cushion the effects of massive corruption’. We are now, 8-months later, facing the consequences of this mismanagement of fiscal posture of our economy.
“You have the baton of leading Malawi until 2025, with commitment to the cause that brought your Government to power, even within 6-months of decisive action and re-assessment of energy direction is enough to re-uplift the spirits of Malawians that trusted your process towards a renewal of Malawi,” said Mhango — who has worked as chief economist at ArcelorMittal South Africa for seven years and as senior economist and head of strategic research and planning at the Industrial Development Corporation for nine-and-a-half years.
He has also worked as chief economist at PetroSA; as chief research director and partner at Kwesthuba Consulting Ltd; as Director of research and strategy at Don Consulting Group as well as executive head of strategy, business planning and communication at Nedbank Ltd.
