Economic policies, deficits and Aid
have not read any of the manifesto statements of the political parties vying for power through the May 20 2014 Presidential and Local Government elections. However, I have read the summaries in the media and have watched television debates of the pretenders to the republican throne.
What has struck me are the similarities rather than differences in the manifestos. They all promise food, self-sufficiency and a healthier economy. In what they say makes one wonder if they make use of top economic advisors. Contradictions in what they say suggests that they have drawn their manifestos without the advice of a detached professional economist. By detached I mean someone who will give advice without fear or flattery.
Citing a few examples of dilemmas and contradictions may not be out of place here. When one presidential candidate says his government will provide universal subsidies to farmers he possibly means he will give fertilizers to all farmers those who cannot afford the market price as well as those who can. This will entail reducing allocation to other services such as health education, defence and agriculture. The universal fertilizers subsidy may make him popular with farmers, but not with patients at hospitals who are told to go and buy their own drugs in pharmarcies because the hospitals has no drugs. If he thinks he will be able to maintain services at the optimum and that there will be enough for all the services then he is not serious about what he is saying.
If someone says he will administer his government with a zero deficit and still provide the services to a higher level one wonders what a zero deficit entails. The other term for zero deficit is balanced budget.
Most of the governments that assist us do not balance their budgets annually. The majority of them talk of reducing the deficits step by step annually over a period of at least five years. Trying to achieve zero deficit in one year requires raising taxes to unprecedented heights and cancelling a number of social programmes. Will the affected people accept this situation with equanimity?
Most Malawians do not practice frugality in their spending habits. They are not likely to embrace austerity measures. When the measures start to bite, you can expect riots and demonstrations in streets and strikes spreading from the High Court to other departments.
Self-reliance is a noble-goal but we must be realistic about what is achievable in the short-run and that what is achievable in the long-term.
Do you want to reduce inflation to as little as five percent annually? You will have to introduce a credit squeeze and this means exposing the country to grave unemployment at the very time thousands of school and college graduates are finding it difficult to secure jobs.
We must encourage our smallholder farmers to grow more food but what policies do we have for the surpluses which that occur from time to time. Food production has both a scientific and an economic approach. Unless they are assisted to sell the surplus profitably farmers will lose incentives to maximize food production.
Fifty years have come and are soon to go, Malawi’s industrial growth still is at the infant stage, what policies does the party have for accelerating the growth? What specific policies are there for encouraging foreign direct investment, small and medium enterprises. What level of State involvement in the economy, vague statements won’t do. The country needs explicit policies.
High growth rates have been achieved before but have not been sustained, what are you going to do about this.
Political Will, National prosperity ahead of May 20
With Alick Nyasulu
Elections for the next president are just two weeks away. The last five years offer free lessons on how political will can affect national prosperity and shape its destiny. If anything, there are lessons in how the destiny of Malawi is shaped. Malawi has just been categorised as the second worst performing economy on the continent after civil-war torn Central African Republic. It is a bad image and it is no good for business growth, job creation and the infant tourism industry. How the next president seeks to change fortunes remains unclear given that most voters have many doubts. No matter who wins, there are a couple of issues that remain cardinal rules for national progress.
Excitement that accompanied “change” at the top of the country is gone. Inflation remains very high and savings are continuously being eroded. Businesses and individuals that have a long-term perspective amid our low saving culture are confronted by high premiums that are indexed to inflation.
The cost of capital remains astronomically very high. The average lending rate is around 35 percent. If businesses borrow they have to charge very high prices. If you factor it high corporate taxes of around 30 percent, it means on average, 65 percent of the profit a business makes goes to either the banks or tax authorities.
The World Bank index of doing business confirms the high cost of investing in the country. Electricity tariffs have simply been raised by 58 percent. One would be tempted to think ESCOM is some loan shark. But it has now become the norm that electricity prices can be raised anyhow with huge jumps. It doesn’t matter even though leaders claim to champion export led growth yet the cost doing business continues to rise.
Sometimes, it is imperative to recognise that Malawi does not operate in a vacuum. The fastest growing countries in Africa are within our hood. As an IMF research shows, economic growth and job creation in Tanzania, Mozambique, Rwanda, Uganda, Burkina Faso has not come as a result of natural resources like oil or mining. It is therefore foolhardily to expect any meaningful economic prosperity with new avenues such as mining and other natural resources.
These countries have made a lot of progress in the way public finances are managed. They have been in a position to reform their tax collection systems and taken the corruption fight for real. In our case we have been so obsessed with passing legislation such as the Public Finance and Corrupt Practices Act. Such moves were well intentioned but we have failed to live by the very acts. Public finances have been misused and the Reserve Bank has for many years been caught in cycle of failure to meet inflation targets in the wake of poor public finance management practices. As a country on the bottom of the economic ladder, it is time to through away all egos and learns from others and put in place practical steps that can get the country out of poverty trap.
As we head to 2014, serious questions need to be asked in respect of shaping the destiny of the country. I am tempted to think our problems are with leadership. Over the years, no matter who has led the country, the style has been the same. No one has ever thought beyond their elected terms in how they practically implement policies. None of our leaders has taken serious steps to fight corruption for real and put brakes on this marauding beast that has condemned millions of Malawians to poverty manifest in malnutrition, low life expectancy rates, squalor living conditions, and dysfunctional health and education systems amongst many others.
To grow Malawi into a modern 21st century economy is not a matter of rocket science. The basics involve good education and health systems besides, creation of a conducive environment for doing business and jobs will follow. But the complement for such success is putting a stop to theft of public funds and strengthening the independence of the prosecution service to deal with all crimes.
So, I contend as various individuals cajole for the presidency, the key issue that as citizens need to be concerned is existence of political will to develop this country. It is an insult to be rich on the basis of a guy next door that is poor.
