Brace for continued depreciation of Malawi kwacha:  Mlusu’s Mid-Year Budget omitted exchange rate, says Mwanamvekha

Main opposition Democratic Progressive Party (DPP)  spokesperson on finance in Parliament Joseph Mwanamvekha has described Minister of Finance Felix Mlusu’s Mid-Year Budget Review Statement  as lacking merit  when it has omitted the exchange rate whic is the key macro-economic fundamental in the budgeting process.

As the Malawi Kwacha is depreciating the inflation will also be increasing as there is a positive correlation between the exchange rate and inflation
Mwanamvekha: MCP government is failing to generate enough forex reserves. Malawians should brace for tougher times ahead as they will scramble for the little foreign exchange reserves.

Mwanamvekha, who was the last minister of Finance in the DPP administration booted out through the court-sanctioned fresh presidential election held on June 23 2020, said the budget is “unrealistic” because Mlusi said currently foreign reserves have been depleted from US$846.6 million in December 2019 to US$ 574.3 million in December 2020.

“This means, Madam Speaker, that this MCP government is failing to generate enough forex reserves. Malawians should brace for tougher times ahead as they will scramble for the little foreign exchange reserves.

“If they are lucky to get these reserves, they will get them at a much higher price than it was under the DPP government,” said Mwanamvekha in Parliament.

He said this  would be exacerbated by the widening of the trade deficit where the country is exporting less than what it importing.

This, Mwanamvekha said, therefore, means, will lead to the continued depreciation of the Malawi Kwacha against the currencies of the country’s main trading partners including the US dollar, Euro, Chinese Yuan and South African rand.

“As the Malawi Kwacha is depreciating the inflation will also be increasing as there is a positive correlation between the exchange rate and inflation,” said Mwanamvekha in whose time as ghe countgry’s purse keeper presided over the the single digit in inflation.

Mwanamvekha referred to Parliament his Masters degree thesis which he said  is available at Chancellor College of the University of Malawi  and the Reserve Bank of Malawi libraries and also been confirmed by a number studies by renown international economists.

Said Mwanamvekha:“Therefore, the projection that the annual headline inflation will average 7.4 will not hold. It is also surprising that the Minister of Finance is projecting an average headline inflation of 7.4 while the central bank is putting the same at 7.8 at the year-end, the question is which is which?  Does this mean the Minister of Finance does not talk to the RBM Governor?”

Mwanamvekha re-inforced his claims that the budget is a consumptive budget because of  the failure to collect the targeted domestic revenue of K600 billion during the period under review with only K564 billion collected, representing a shortfall of K36 billion.

On the expenditure side, he said instead of spending K975 billion, it spent K998.5 billion, representing an increase of almost K24 billion which caused net borrowing of approximately K30 billion as at end of December 2020.

Furthermore, instead of borrowing K266.3 billion at end of first half, government borrowed K350.9 billion of which K304 billion was borrowed locally, thereby overcrowding the private sector.

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Phyot Olera Kun Yini
1 month ago

MCP mbola yeniyeni yanjuchi. Zero delivery. Anzawo anasiya forex ya 6 months cover koma iwo anyambitamo fotseki MCP, fotseki chilima, fotseki mulusu.

Muliyekha
Muliyekha
1 month ago

Tiri mavuto a Malawi anthuwa alephera kuyendetsa boma anazolowera kotsutsa

Clara
Clara
1 month ago

Have you noticed the depreciation of MWK since regime change?? And the sharp increase of basic commodities… something that has to be seriously checked

Shadreck
Shadreck
1 month ago

This government is a shit. It will make all business collapse and Malawi will be like Zimbabwe in a few time. All industries are retrenching, and are closed to bankrupt. Without a strong industry, there is no possible development.

nsundwe Boys
nsundwe Boys
1 month ago
Reply to  Shadreck

its a shit show, amalawi tatondeka

Dan
Dan
1 month ago

This is clap what ca he advice the government now having during their time plundered huge amounts of money giving to DPP thugs to mess up other good Malawians? Now I know that every face tells a story

Sarah sarah
Sarah sarah
1 month ago
Reply to  Dan

When are you guys going to start smelling the coffee really? There might have 8ndeed widespread corruption during DPP era. But that does negate the fact that the current tonse govt is making a mess of our once stable economy. Budgeting is where you know the thinking, vision and direction the country is heading. Thus why we use to have a stable exchange rate, inflation in single digits, Forex reserves at all time peak high. It wasn’t coincident, it was good economic governance and synergy between finance, economic planning ministry and reserve bank. This currently is non existence. Don’t even… Read more »

Mwini muzi
Mwini muzi
1 month ago

The economy is already in jittery. Government is already borrowing and will continue to borrow to cover for the continued deficiet.No donor for budget funding is expected anytime soon.Norad countries used to help us a lot on budget funding but with corruption that has now spilled over to our new administration, Malawi should indeed brace for more painful economic woes.

Justice for all
Justice for all
1 month ago

He sounds right mwananveka this government is failing

MCP Diehard
MCP Diehard
1 month ago

We shall not fault you Mr. Chithumwa for you are but doing your job as the opposition. If you don’t criticize the government of the day, you will be out of your job so we understand. 2020 has been wrecked economies the world over. The Mighty United States of America itself just recorded the worst economic performance in 74 years. With everything being equal, Malawi is not anywhere close to that. Praise the Lord. At least we have Men of high integrity and brains running the country. Ife we don’t know whether it’s Mwanamveka talking or the Chithumwa he carries… Read more »

Last edited 1 month ago by MCP Diehard
Jah~Guide
Jah~Guide
1 month ago
Reply to  MCP Diehard

Just accept that the government is being run by amateurs. They don’t know what they are doing.

MCP Diehard
MCP Diehard
1 month ago
Reply to  Jah~Guide

Pick up a dictionary or thesaurus and look up the word amateur. It will do you some good. The country under DPP was literally run by Chisale, mchacha- form-form, Ben Phiri, Chimulilenji, Gertrude-Rango & son, but here you are with total amnesia trying to convince us otherwise. If you were pros as you claim to be, how did the whole party let a security guard hijack the whole presidency? Nothing could get to Mutharika without Chisale reviewing and approving. Geti ze faki awuta hiye. If anyone thinks MCP is getting out of Power anytime soon, I have a bridge to… Read more »

Donald McLean
1 month ago
Reply to  MCP Diehard

If you think majority of malawians think lowly as you do, you are making a grave mistake. And you must be wrongly underestimating the impact of the current crop of citizenry regarding issues of state governance, with your blind loyalty to your mcp/utm. You may try to support your tonse government though it is failing miserably and on the other hand talk with disdain against DPP but the reality on the ground is very clear for everyone to see: we were better off during DPP than now in many respects. try to ask neutral minds knowledgeable in economics regarding this… Read more »

magic man
magic man
1 month ago
Reply to  Jah~Guide

Think about it though: This man walks around with some mysterious object in his pocket which he believes influences events around him in his favor wherever he got the object from.

And we want to be taking any advice from this person. komatu guys, we have to be serious for real

NABETHA
NABETHA
1 month ago

The evil of money printing world wide is responsible for this mess, brace your self for the Oduwa coin which is believed to by pass the system fake money, fake banks, fake economics………SHAME ON FAKE TEACHERS!!!!

bentby
1 month ago

he doesn’t know what he is talking, zoti all countries are suffering devastating effects mmutu mwawomo sizikumveka. anyway let him tell me the country that has experienced positive economic growth in the last 12 months? COVID has not spared any country.

Hate it or take it but it's a fact
Reply to  bentby

Better this Tonse government than Peter Muntharika sleeping on the Job while Norman Chisale and Gertrude Muntharika were using his name to steal billions of Kwachas.

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