Cut the Chaff

I wish I could wish you a Happy New Year!

At mid-night on Thursday, a lot of people in Malawi must have let loose a huge sigh of relief as they turned their back on 2015 with hisses of ‘good riddance!’—glad that they would never see it again—and looked at 2016 with hope, some hope, that it would bring them better tidings than its predecessor.

And who would blame them? Those folks who lost everything to the angry floods that swept their houses, animals, crops, hopes and nearly 200 relatives will always look at the year 2015 with a mixture of horror and deep loathing.

The folks who saw the unforgiving sun scotch their crops dry as drought hit their areas have bitter memories of the year.

The poor Malawians; those who survive on less than a dollar per day—and they constitute at least half of the country’s 16 million-strong population—look at 2015 as a year of betrayal.

You see, the United Nations (UN)—and the Malawi Government gleefully agreed in the year 2000—that by 2015 they would halve poverty levels among a set of other ambitious aspirations they called Millennium Development Goals (MGDs).

As most of us know, by the end of this cursed year, there was no dent, not even, a scratch, on poverty reduction. By some calculations, poverty levels have in fact worsened.

Now the world, under the UN—and the Malawi Government once again has committed to do the needful—by coming up with even more goals contained in even fancier language called Sustainable Development Goals (SDGs).

More likely, the world will sustain poverty, not cut it as it is being sold, and further expand the gap between the rich and poor. So, no, there is no love lost between the year 2015 and poor Malawians.

For the economy in general, one has to go as far back as 2001/2002 to see a worse year. Headline inflation is around 25 percent and rising as prices of both food and non-food items jump sharply.

The sharply rising inflation is a harbinger of even higher interest rates that are likely to crowd out private sector borrowing as well as limit spending and investment in an economy that desperately needs both as disposable incomes get gnawed at and real returns plummet. What’s more, real interest rates are well above 40 percent—and rising fast.

As the foreign currency lean season continues—worsened by weak terms of trade, depressed revenue from agricultural products such as tobacco and the freeze on budgetary support—the Malawi kwacha continues to receive a heavy battering; bringing the risk of even higher costs of imported goods, a worsening trade balance and, lo and behold, a frighteningly depreciating local currency that can only lead to even higher inflation as if food shortages are not causing enough damage—the vicious cycle continues deep into 2016!

As for economic growth—as measured by gross domestic product (GDP)—estimates are now down to three percent from a budgeted 7.7 percent.

Personally, I suspect that our GDP growth rate is in negative territory, but hey, I have no expertise in computing national accounts; so I will wait and see.

For the fiscus, 2015 was a nightmare. The Malawi Revenue Authority (MRA) would never win an award for efficiency in revenue collection, even if it were running against itself.

But this year it really out did itself. The tax bull consistently missed its revenue targets, leaving the cash-strapped Treasury in disarray.

Consequently, a month would go without some institutions, including public hospitals, receiving their operational budgets called other recurrent transactions (ORT).

As a result, patients have been left to starve in hospitals. Those mostly poor, rural-based folks who needed to be transferred to referral hospitals for emergency medical attention were left for dead as there was no fuel in ambulances to transport the patients.

Even those who had managed to be transferred and treated at, say, Queen Elizabeth Central Hospital (QECH), were stranded and became beggars in Blantyre City as, in the absence of ambulances; they had no means of returning home.

The point is that forced expenditure cuts across sectors were the most painful in the cruel year gone by and it will take a long time for the public service delivery architecture to recover from that setback.

When a colleague from Zodiak Broadcasting Station (ZBS) was recently interviewing me on what I thought about the economic situation in 2015 and prospects for 2016, he noted that I was all doom and gloom without giving any hope.

Well, as I told this journalist colleague, there are some green shoots in the mining sector if we do not allow petty politics and silly bureaucracy to ruin everything. I also note some tightening—but not enough—in public finance management, so that’s a fairy good thing. And I see a few possibilities in one or two other sectors.

But the truth is: I really, really, wish I could wish you a Happy New Year; but I would rather wish you luck; you will need it in 2016 because a happy year it won’t be. n

 

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