The Indigenous Businesses Association of Malawi (Ibam) has complained about the hostile business environment in the country, saying there is not much to celebrate about during the one year rule by Malawi President Joyce Banda.
Ibam has since cried foul over sky-rocketing interest rates on the financial market, which it says has “virtually killed” business operations.
“As indigenous business people, we see no reason for the ruling administration to celebrate the so-called achievements on the economic front because the business environment we are in has become even more hostile than one year before,” said Ibam chairperson Leston Mulli in a telephone interview on Wednesday.
Mulli, who is also managing director of Mulli Brothers (MB) Holdings Limited, wondered how companies and small and medium enterprises (SMEs) could generate enough profits when banks are charging high interest rates.
Lending rates in commercial banks have jumped to as high as 45 percent despite the Reserve Bank of Malawi (RBM) base lending rate being maintained at 25 percent for about four months.
Analysts contend that increased domestic borrowing by government from RBM coupled with liquidity shortages across the nation made the interest rates to accelerate significantly in recent times, hindering private sector borrowing and investments and also constraining economic growth in the process.
Mulli said most of Ibam members have reported increased default rates on account of increased lending rates on the market and wondered why ‘other people should celebrate while others are closing shops and groceries.’
According to Mulli, foreign exchange scarcity has worsened for the past one year despite high anticipation that the floatation of the kwacha would induce foreign exchange availability.
“During president Mutharika’s regime, reserves used to cover for about 1.5 months which is unlike during this regime when reserves are not exceeding 0.9 months cover. This economy needs reorganisation,” he said.
As of Wednesday 12th April, 2013, gross official reserves stood at $165 million representing 0.88 months of import cover as compared to $178 million worth of gross reserves or 0.95 months of import cover for the week ending 5th April, 2013, according to RBM official statistics.
On Tuesday, Henry Chingaipe, an expert in governance and development, noted that the President has done well on high level needs or macro-level but noted that cash poverty has become worse since she took over the reins of power.
Chingaipe also said government needs to find an intelligent way of cushioning the adverse effects of the 49 percent devaluation of the kwacha effected in May last year.
“Stabilising the kwacha holds key to stabilising the economy. But I do not know how government can achieve that knowing fully that there is not enough of forex being generated from tobacco sales,” he said.
But Information and Civic Education Minister Moses Kunkuyu said, government had to devalue the kwacha in anticipation of short-term benefits of a weaker currencyand that initiatives were put in place to cushion the economy from the adverse effects of the reforms.