Kachaje: Inflation, the “Bureaucratic Robber”
Persistent high inflation is a serious “crime against humanity” that an insensitive and uncaring government can inflict on its own people. When inflation remains stubbornly high over a long period, even those that are financially prudent and save money diligently become victims of a “bureaucratic robbery”.
Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. Inflation means a sustained increase in the aggregate or general price level in an economy and an increase in the cost of living.Simply put, “inflation means that your money won’t buy as much today as it could yesterday.”
Let’s say that with K1,000 in January 2015, you could buy five loaves of bread. But come January 2016, the same K1,000 can buys you just three loaves of bread; this means you have been “robbed” of the purchasing power to buy two extra loaves of bread. You might have saved K100,000 in January 2015, but with inflation at almost 25%, the real value of your money after a while is just K75,000. Inflation has robbed you of K25,000. This is how cruel and evil inflation is. This is why a caring government must always strive to keep inflation as low as possible. If it doesn’t, then such a government is actually “robbing” its citizens.
But what drives inflation in Malawi? Government over-expenditure, borrowing for consumption and the rising cost of food, especially maize. These are classified as food and non-food inflation. To control inflation, government must desist from spending money it does not have. Can this be done? Is it possible? YES, it can be done.
First of all, as citizens, we must DEMAND that our government only spends on us what we have contributed to the national purse through our taxes and other revenues. It is unpatriotic of us as citizens to expect government to spend on us money we didn’t give it.
There are burdens that government is carrying that should otherwise be on our shoulders as individual citizens. Feeding my children porridge for example is my responsibility not government’s. But providing primary education to my children should be the responsibility of government. Building my own house should be my responsibility. But building a classroom block for my kids should be the responsibility of government.
Unfortunately, with our misunderstood democracy, many of us have obligated our individual responsibilities to government. This gives pressure on government to keep borrowing to provide to the citizens services that cannot be accommodated in the revenue purse. Consequently, government keeps “robbing” us through high inflation. In the end, we are the big losers when government, under pressure to please us, keeps borrowing to do for us what we should have done ourselves.
To bring down inflation therefore, we the citizens must demand that our government should only spend on us what we have given it through taxes and other non-tax revenues. This will require sacrifice on our part and we need to tame our appetite for freebies. Government must only be allowed to borrow for infrastructure developments that have the capacity to facilitate economic growth.
k577 billion is not a joke. this is the starting point of inflation kwinaku nkothera chabe
The article has just touched on a factor contributing to the poor performance of the economy. Given that a number of economists came together (synergy) each one could have his/her input. I thought the meeting organised by PAC was meant to discuss such issues, but alas, some selfish politicians hijacked the aims/objectives of the meeting and begun selling their untried and impractical ideologies. Malawians expect too much from government and yet we don’t contribute anything towards its sustenance. If the same government tries to raise money through taxes we complain, if they prop up tuition fees we cry foul and… Read more »
nice and well put. the government should and must indeed spend on us what we have given it. the way the purchasing power is getting eroded is worry some. but still we can’t blame the government alone but rather as Dr Kachaje has rightly put it, we ourselves have some blame to carry for requiring the government to do for us what we should have done ourselves.
Inflation is created by exchange rate losses, the main problem is our governor is clueless on how to manage exchange rates. Chuka instead of introducing policies to make kwacha stable. he has made policies which are fuelling kwacha depreciation 1. Chuka in April 2015 introduced policy where exporters retain 100% of there export proceeds, while eversince colonial rule exporters were only allowed to keep 60% and 40% was being changed into kwacha. This was helping Kwacha stability 2. Depreciation/Apprecaition limits are subject to 0.25% per day, the appreciation limit of 0.25% should be scrapped, it should be allwoed to appreciate… Read more »
Thank you, Dr Kachaje, for bringing clarity to this issue.
I have just one tiny nit to pick: in your penultimate paragraph, I think you meant ‘abrogated’, not ‘obligated’.
O……………………………………………………………………………………………………………………………………………………………………………………………………O To assertain that Malawi’s inflation is caused by governmment budget deficit is a clear manifestation of not being up-to-date with, hence a careless misrepresentation of recent data . . . . . . You can ask any analyst or economist who is up-to-date with empirical research or Malawi’s economic data; you will be told that the exchange rate path is the one which exerts a statistically significant impact on Malawi’s inflation, and not money supply path (which government expenditure is a part). . . . This is why the moment the pump price is adjusted on the basis of… Read more »
And why is government straggling to finance hospitals and schools adequately? Reasons: 1. We are breeding children at a faster rate such that government can not cope 2. Our borders are porous such that our Mozambique neighbors are using our resources 3. Farming maize has become so expensive such that lot of people abandoned it preferring to buy instead which is a cheaper option. Production has surged instead.Thats why besides flooding and poor rains, this has been a problem for a long and will remain so if Government does not think deeper on this. 4. We import too much for… Read more »
Had just started to appreciate your argument Henry when the article ended abruptly. Perhaps you could expound a couple more examples? otherwise I agree, you make the subject tolerable albeit if not too simplistic!
The National Identity cards will fuel further tribal delineations. Do we really need to be identified by our tribes, what for if we are all Malawians.
Some of us do not even come from TA’s jurisdictions but cities. What is going to be printed on the cards, TA Mzuzu City Mayor?
thanks Mr Kachaje that now you are talking the truth beyond your political ambitions, we need this to build our nation and from this we can learn how to overcome serious challenges affecting our nation.