Forex shortage hits Malawi, Kwacha depreciating: Opposition says Chakwera fails to outline measures to keep economy ticking

The local currency, the kwacha, is weakening against all major convertibles and foreign exchange reserves are depleting according to, Reserve Bank of Malawi (RBM) figures with Leader of Opposition in Parliament Kondwani Nankhumwa accusing President Lazarus Chakwera for failing to adequately address measures to spark the economy.

Nankhumwa was responding to Chakwera’s maiden State of the Nation Address (Sona) delivered in the House on Friday.

He said Chakwera’s Sona failed to boldly define a comprehensive road-map, let alone timelines of how his electoral promises would be implemented.

Instead, Nankhumwa pointed out that President Chakwera chose to hide behind “less definable Hi-5 agenda, such as prospering together and subtly throwing the responsibility of ending poverty in this country back to Malawians.”

The opposition leader said he is disappointed that foreign reserves are “fast dwindling” under the Malawi Congress Party (MCP) government than it was under the previous DPP regime.

“Forex is scarce; the Kwacha is depreciating and many Malawians are failing to buy goods and services due to a weaker Kwacha.

Malawi experiences significant seasonal volatility in its foreign exchange inflows, with earnings from the key tobacco export crop concentrated during a period between March to August.

Nankhumwa said President Chakwera in his SONA, did not adequately address this matter, “especially on what measures his administration would put in place to keep the economy ticking.”

But Chakwera in his address said Malawi’s economy will contract 1.9% this year because of instability caused by a presidential election re-run and the Covid-19 pandemic.

Chakwera said public debt had risen to 4.1 trillion Malawi kwacha ($5.53 billion), or 59% of gross domestic product.

He repeated promises to crack down on corruption, saying it was holding back economic growth.

“The success of Malawi’s economy going forward, … we will not tolerate corruption nor will we interfere in the affairs of institutions fighting corruption, we will observe the rule of law in order to provide predictability of the political and economic environment,” he said.

In the agriculture sector — a lifeline in Malawi’s economy — Chakwera announced the start of an “affordable inputs program,” in which 4.3 million smallholder farmers will receive subsidized seeds and fertilizers.

He said this will improve tremendously the level of productivity in the sector, which currently contributes 30 percent of the country’s Gross Domestic Product.

Meanwhile, Nankhumwa has asked the Chakwera administration to seriously consider reducing cooperate tax the private sector pays to government.

“Due to Covid-19 the private sector is failing to register profits and end up firing employees or put them on half pay. This development has led to accumulative figure of about 400,000 already dismissed from the time Malawi registered its first Covid 19 case in April this year.

“Statistics further indicates that, if this left unchecked, the private sector, shall lay off about a million workers by December this year,” he said.

The opposition leader wondered how the government will fund the huge wish-list that President Chakwera has produced in his SONA without borrowing domestically as well as internationally.

“This is mindful of the fact that domestic borrowing is inflationary and could be a disincentive to investment, which the government needs to create jobs and spur social and economic development.

“This is where fiscal discipline meets political rhetoric and it is not always a pleasant atmosphere,” he said.

Nankhumwa said although he knows it is difficult for MCP to acknowledge, the DPP government successes under former president Peter Mutharika recorded some landmark progress in institutional, social, political and infrastructural developments that the new government can use as a springboard for economic success.

Chakwera unseated Mutharika in a June 23 re-run election after the 2019 polls were overturned by a court, citing irregularities.

Eyes now are on Chakwera’s first full national budget which the finance minister Felix Mlusu is expected to deliver during the current sitting of parliament.

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