The opposition Democratic Progressive Party (DPP) says the current economic mess is of the Tonse Alliance administration’s own making because it watched the escalation of the exchange rate without employing mechanisms to control it.
During a news conference in Lilongwe yesterday, several DPP leaders including former ministers of Finance Goodall Gondwe and Joseph Mwanamvekha as well as former Reserve Bank of Malawi governor Dalitso Kabambe took turns to point out weaknesses of the current administration that led to the economic crisis.
In apparent reference to last week’s 25 percent devaluation of the kwacha that sparked instant price hikes, Gondwe warned that the situation may worsen further and lead to another devaluation because the government seems clueless about economic management.
He said: “The reason why we have the devaluation is because we have too much kwacha in the system due to government’s excessive spending and the kwachas are chasing a few foreign exchange, therefore, the exchange rate price has gone up.
“What I am saying is that if the government continues spending, hiring aeroplanes for foreign trips, we will continue having more kwachas than foreign exchange and it is quite possible that the International Monetary Fund [IMF] would ask you to devalue again.”
Gondwe, who has previously worked at the IMF and African Development Bank in senior capacities, said unless government cuts on spending such as travels and buying new vehicles for public workers, the foreign exchange black market will thrive while the official rate will be lower and force another devaluation of the local currency.
On his part, Mwanamvekha accused the government of worsening public debt currently at close to K6 trillion from K4.5 trillion when the DPP lost the court-sanctioned Fresh Presidential Election on June 23 2020.
He said excessive borrowing to finance the national budget deficit is impacting the economy negatively.
Mwanamvekha agreed with Gondwe that if government is not careful, the kwacha will be devalued again soon as with huge spending, there will be more kwachas chasing a few goods.
He said even the 25 percent devaluation was made without considering the welfare of the people and that it will not solve anything in the economy because it has been announced in haste.
Mwanamvekha said: “Fuel, medicine and fertilisers consumes more forex in the economy and this will continuously increase the import bill. Currently, some people, for instance those in fuel business, are in a wait-and-see situation in anticipation for price adjustment, this will cause scarcity because the devaluation has been mismanaged.”
He also said when DPP assumed power in 2014, the People’s Party administration was embroiled in Cashgate, but it undertook serious austerity measures to feel the pain with the people.
Mwanamvekha said former president Peter Mutharika, his vice-president Saulos Chilima and Cabinet ministers had their salaries reduced to manage public spending.
Besides that, he said the DPP grounded government vehicles to tame unnecessary internal travel and foreign travel was limited to three times a year until the economy stabilised. He said the opposite was happening now.
In his statement, Kabambe said the 25 percent devaluation will hurt the economy because it automatically paralyses the private sector which requires forex to import raw materials for production.
The former central bank governor said the current economic challenges have been created by the Tonse government because responsible officials were watching without implementing solutions on exchange rate disparities between the black market and commercial banks.
Said Kabambe: “Since the current administration assumed power in 2020, the monetary policy rate has been completely impotent leading to rising inflation.
“The exchange rate has been very loose, leading to the widening gap between the parallel and official rate, macro fiscal framework has been poor, leading to worsening economy. We are facing this situation because of the poor fiscal and monetary policies.”
He claimed that forex from tobacco sales in recent years is not impacting the economy because there is a lot of transfer pricing in the tobacco industry.
Kabambe said the trend needs to be investigated, but claimed that the current government lacks the technical ability to investigate such issues.
On his part, DPP spokesperson Shadric Namalomba dared the Tonse Alliance administration to call for a referendum to establish whether Malawians would still vote for them today.
He also urged government officials named in the Zuneth Sattar corruption list to voluntarily resign to pave the way for the course of justice to prevail.
But in an interview last evening, Professor Mustaph Hussein, who teaches political science at the University of Malawi, said the DPP has no moral ground to call for a referendum.
He said: “They are an interested party and they need to have strong reasons why they are calling for a referendum. Otherwise, people will interpret that they want to indirectly over take the government.”
Minister of Information and Digitisation Gospel Kazako and presidential press secretary Anthony Kasunda were yet to respond to our requests for reactions to the DPP’s assertions.