Hon Folks, while APM was preaching “doing business unusual” at the UN General Assembly in New York, Finance Minister Goodall Gondwe was home to hear IMF attest to that in light of the speed with which government’s mediocrity has led to the derailment of the $150 million Extended Credit Facility (ECF) with the Bretton Woods Institution.
It was only in March when the IMF approved the disbursement of $18.1 million (about K7.4 billion) and the extension of the current ECF by six months to May 2016. That nod sent a green light to the African Development Bank which gave Malawi $29 million (about K13 billion) budgetary support.
All along the government kept on assuring us it has not only fulfilled what it promised in the run-up to the 2014 Tripartite Elections but also that it was doing its best to put the economy back on track, setting for itself a five-year target to be completely weaned from donor dependence for its recurrent budget.
Yet, only months in APM’s second year in office, we hear the economy is so messed up that there’s no way MRA can meet its revenue targets even if batons and handcuffs were to continue being used against those who do not use the electronic fiscal device to correctly capture the much-needed 16.5 percent VAT.
IMF simply told government to recast the 2015/16 National Budget to reflect the realities of shrinking economy. Now, this indeed is business unusual because downward recasting of the budget is, at least here in Malawi, a man-bites-dog-scenario.
But that should be the least of our worries. The million kwacha question is: What happens to the provision of public goods and services if the budget is reduced? Already nurses and teachers are complaining about reduced or late payment of their salaries or perks. Hospitals have parked up ambulances and the police, especially in the cities, are banking on residents to help with fuel or tyres.
The number of issues arising from reduced funding are many and growing even as government keeps on increasing fees for its services in some cases by over 1 000 percent!
Not surprisingly, government’s tendency to buckle easily when its employees threatened to go on strike if their demands —huge pay hikes—were not honoured has not escaped the attention of IMF which observed the recurrent budget was weighed down heavily by the larger-than-the-economy wage bill.
Unfortunately, there’s no government turning back on this one unless by way of retrenchment which is itself an extremely costly exercise.
In some cases, government struck a deal for phased payment of the pay-hikes. This means it will either have to continue bloating further its wage bill or pretend it never entered into any phased pay hike deal. The latter will probably stir up some dust, if not an outright whirlwind in labour relations.
It’s ironic that despite being under the multiparty system for the past 21 years, folks in government still do not seem to know that when elected leaders make costly mistakes it’s the electorate that foot the bill.
After thanking Bingu massively with our votes in 2009 for the impressive economic growth rate of 7.5 percent on average during his first term of office, he deliberately crashed the economy by messing up with donors, held the kwacha from falling by political strings and meddling in the regulation of monetary policy among other flaws.
In 2012, Joyce Banda worsened the situation by her radical reforms that saw the kwacha being devalued by 49 percent and floated in the same breath without any forex cushion. It’s a highly risky venture that depended largely on donor aid. Unfortunately she bungled it all when in 2013 the massive looting of government funds codenamed Cashgate was exposed.
Donors stopped providing budgetary support and most of them diverted their development aid from Account Number One—which they could not trust—to NGOs whose development agenda is only meant to supplement government effort. The problem was that development aid constitutes almost 80 percent of the development budget.
The consequence of that was the kwacha doing a head-spin then tripping and rolling down the economic cliff. The worst is probably yet to come. But when government employees demand a huge pay-rise to stave off inflation from an economy that’s not generating wealth, the result is what IMF tells us—estimated economic growth rate dropping from over 5 percent to 3 percent.
But while we are sharing poverty, weather experts predict that the el nino which wreaked havoc last year, may also hit Malawi this year. Should that happen, we’ll have natural disasters aggravating our miseries for two years running. That’s business unusual, you’d say.