Former Finance Minister Mwanamvekha contends that DPP-led government managed the economy very well
As the country’s fierce critics continue to express their dissatisfaction over the mismanagement of Malawi’s economy, former Finance Minister in the Democratic Progress Party (DPP) regime, Joseph Mwanamvekha has distanced his party over the mess, saying “the DPP-led government managed the economy very well”.
The former government purse controller from July, 2019 to May, 2020, maintained that this assertion “is on record, and that empirical statistics and evidence is available to confirm this fact”.
“There have been a lot of misreporting and misinformation on current shortages of forex in Malawi and the Tonse Alliance government, in many instances The Tonse Government has resorted to blaming the DPP administration.
“It has always been my wish not to comment on such issues because our President, His Excellency Prof Arthur Peter Mutharika, advised us not to interfere on how this government is managing the economy and foreign exchange.”
He emphasised that “all macroeconomic fundamentals were stable and on a decline trajectory — that inflations dropped from 30% to a single digit and also dropped from over 30% to an average of 12%.
“The exchange rate remained stable for over three years. Import cover hovered between 4 to 6 months from less than a month when we took over in 2014. In all this summed up in improving peoples per capital income and well-being of Malawians.
He thus highlighted what he described “as material facts on why Malawi is facing forex shortage under the Tonse Alliance administration”, which include:
1. Increase of AIP beneficiaries from 900,000 (90,000MT) to 4,700,000 (470,000MT) — translating a whooping and astronomical jump of importation of fertilizer importation bill to K160 billion. This translates to an increase of the country’s fertilizer import bill from US$46 million to US$213 million;
2. Cancellation of IMF’s Extended Credit Facility by Tonse Administration which led Malawi to lose $101 million which was already negotiated by the DPP led government. One would have expected that the Tonse government would have continued with the programme while negotiating a new facility to allow a seamless transition into a new programme;
Malawians would want to know that this programme as at the end of our tenure was on track as observed by the First Deputy Managing Director Mr. David Lipton, and Acting Chair, who stated: “(Despite large reconstruction and balance of payments needs following Cyclone Idai Malawi’s ECF program performance has been satisfactory. Program-supported structural reforms advanced, addressing several important gaps that had previously been identified in public financial management. All quantitative performance criteria were met…….)”;
3. Failure to negotiate with local cooking oil manufacturers and resultant issuance of importation licenses for cooking oil to many players meant a lot of foreign exchange leaving the country hence exporting jobs elsewhere and depleting our meagre foreign exchange reserves. Further to this, we understand that now Tonse administration wants to give more fuel importation licenses which may deplete further our foreign exchange reserves. Really, should DPP be blamed for this?;
4. Unfavorable tobacco and other export proceeds. You may be aware recently Malawi as a country failed to realize good returns on tobacco which happens to be our main forex earner and cotton proceeds have not been good either;
This means that Malawi failed to realize US dollars which could have been used to cushion foreign exchange reserves as it has been in the past hence contributing to the scarcity of the foreign exchange;
5. Government decision to be importing fuel on CIF (Cost of fuel+ Insurance + Freight) thus government paying to the suppliers for fuel, insurance and freight in US dollars instead of buying fuel only in US dollars and arrange the insurance and freight locally which will be paid in Malawi kwacha. Basically, instead of using local transporters and insurers, we are now exporting jobs to foreigners; and
6. Crude oil globally jumped from around US$60 per barrel in 2019 to about US$123 in 2022 thereby doubling our fuel import bill. Malawians may wish to know that the demand for fuel in Malawi is inelastic hence the demand for fuel is not affected by the increase in price.
“From the forgoing, it is surprising that the Tonse administration would like to always blame the DPP for mess that they have created in the last two years,” he continued. “Tonse Alliance has gone further to blame the DPP for their failure to negotiate the new facility with the TDB and AFRI-Exim-Bank forgetting that they called the same institutions as money launderers.
“As a matter of fact, Malawians may wish to know that the Tonse Government sent a team to Egypt to meet the Afriexim Bank and in Kenya to meet Trade and Development Bank (TDB) to negotiate foreign exchange facilities but have not succeeded.
“Now, they have resorted to travel to Badea-Saudi Arabia for the same. We know that should they fail to negotiate in Saudi Arabia they will again, as usual blame the DPP and the son of Chiradzulu, Joseph Mathyola Mwanamvekha as a cause of their failure,” he concluded.
Several analysts have also criticised government’s failure to solve the spiraling economic crisis, with South Africa-based chief economist Chifipa Mhango offering Chakwera 5-straight action plan to win back confidence of IMF.
Chifipa Mhango — who has over 25 years of experience — proposes:
1. A fast-paced and aligned economic policy implementation that is also based on fiscal prudence approach;
2. A decisive action on issues of Governance and alleged corruption without fear or alleged politicisation;
3. A re-commitment to the Constitution of Malawi and its people in defining Government development agenda that is broadly inclusive of all to reduce poverty and inequality, as per IMF goals in its lending criterion;
4. De-politicisation of the key civil service appointment model with a merit based approach guided by a performance based contract approach, taking a quarterly review approach on Key Performance Indicators (KPIs) to ensure delivery; and
5. Seek the support and input of broader constituency of stakeholders for action based solutions on the economy of Malawi.
Meanwhile, Minister of Finance, Sosten Gwengwe told the nation over the week that discussions with the IMF on the new ECF are ongoing and hopes Malawi will be able to satisfy the requirements set to access the facility.
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