Malawi commentators downplay govt claims on economic recovery: ‘Too early to celebrate’

Malawi’s economic and business commentators Vitima Mkandawire and Henry Kachaje have described as insults government claims that the country’s economy has recovered due to the appreciation of the local currency – while the situation on the ground “continues proving to the contrary”.

Speaking during the ‘Sunday Round-Table’ program which Nyasa Times monitored on a privately owned Capital Radio, the analysts said the truth of the matter is that the appreciation of Kwacha is just an indication that the local currency is on its path towards stabilization arguing that full recovery of the economy like that of Malawi is a long process which cannot happen overnight.

“What we are seeing now is the true reflection of supply-and-demand-economy, not that the economy has recovered,” said Kachaje who is the Executive Director Business Consult Africa.

Kachaje said the recent reduction in fuel prices might be because the government has removed levies on fuel which were helping push fuel prices on higher levels.  However he warned that the challenge is the long run impact of taking away such levies.

 Kachaje: We started in cities
Kachaje: We started in cities

“Let me take you back to March 2012. In March 2012 the fuel price like petrol was K290 per litre and for diesel was K285, In March 2013 petrol had gone to K704 and diesel at K683 if you look at the two, petrol and diesel, their prices rose at an average of 140 percent. So if from the rise in 140 percent and now it has dropped by something around 2 percent do you describe that as a recovery? Or it is at least the reduction in the acceleration of the economy which was going haywire,” said Kachaje.

He said if anything, what Malawians should be celebrating is that there are some breaks now that are happening in the economy which are arresting the sky-rocketing of prices which was going out of hand.

On his turn Mkandawire said judging from such developments Malawians should not expect the small scale businesses to reduce prices of their goods unless they are assured that the current situation appreciations of kwacha is a continued process.

Despite prices of some goods going down, Mkandawire said, most of the companies that have reduced their prices like Illovo Sugar Company is because they are assured that they will be benefiting through what he called economies of scale since he said are the companies who had already making huge profits in the past and now the reduction will help them make more profits because people will be buying more.

However, Malawi government authorities  says that they will soon conduct on-spot inspection of commodity prices to ensure that retailers are not overcharging consumers following what they say recent improvement of the country’s economy which has necessitated fuel price reduction.

“The manufacturers of some basic commodities like bread and soap have reduced prices following the recent fuel price reductions and the appreciation of the Kwacha against major foreign currencies. It is sad that some business operators are not heeding these changes and are still maintaining the old prices of goods and services,” Minister of Information and Civic Education Moses Kunkuyu said.

Mkukuyu said government would be compelled to take measures against business operators who are ripping off consumers.

But Mkandawire said during the program that it would be unwise for the government to force small scale businesses to reduce their prices because this is against the rules of liberalized economy where prices are dictated by supply and demand.

“If anything it is the consumers themselves who can effect price reduction through ‘option buying’ whereby they can avoid buying from those charging higher prices,” Mkandawire said.

Almost all contributors to the program through SMS and phone calls concurred with the analysts saying it’s too early for the government to start boasting of economic recovery while people in rural areas are failing to make ends meet due to continued sky-rocketing of goods and services prices on the market.

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