IMF faults Malawi on price cut directive
The International Monetary Fund (IMF) has cast doubt on the effectiveness of a recent directive by Malawi Government, through the Ministry of Information and Civic Education, asking companies to slash prices of their products following the appreciation of the kwacha.
According to IMF, forcing producers to cut their prices is coercion and not “a lasting solution to major problems” facing the economy.
“Well, I doubt that government intends to actually control prices because I don’t think that will work and am sure the government knows that,” said Tsidi Tsikata, IMF Mission Chief for Malawi on Tuesday.
Tsikata was responding to a question on the fund’s perspectives on the directive which has sparked debate and controversy since Minister of Information issued the directive on June 5.
In the directive, government threatened to “unleash proper penalties” on companies that will not effect price reductions on their products following the recent gain in the value of the kwacha against other foreign reference currencies.
Government “strongly” condemned and warned any continued deliberate defiance to a call for the price reduction of goods and services.
But Tsikata said it is difficult for government to control prices of goods and services “if the underlying factors” are not in support of such enforcement.
He said the key is for government to enable a conducive environment in the country that would in turn create competition among private sector players and producers in particular.
On his part, Malawi’s Minister of Finance Ken Lipenga said government does not believe in coercion adding that government has a responsibility to politely ask firms to respond to recent strides in the economy.
“The language which was used [in the press statement] was perhaps not good, but it was just an appeal to the private sector. But, apparently, the appeal to the private sector are much easier to take when they come from others and not from government,” said Lipenga.
Minister of Information and Civic Education Moses Kunkuyu said in the earlier statement that the Ministry of Industry and Trade and in collaboration with the Competition and Fair Trade Commission will immediately start inspecting shops and companies to appreciate the prices and take decisive action where necessary.
CAMA led by John Kapito is the right body to call for price cut because they represent the consumers, but for political leaders to call for price cut, that is a bad move indeed, it scares investors as Malawi is on Free Market economy.