Light at the end of the tunnel?

It appears there is some light at the end of the tunnel. So far, statements from the International Monetary Fund (IMF) and our own African Development Bank (AfDB) have been very encouraging to many a patriotic Malawian dying to see the country out of the economic turmoil it was slowly but surely sinking into.

These developments are coming against a background of donors, who traditionally contribute about 40 percent to the country’s national budget, freezing budget support last year. The freeze created fiscal and foreign currency imbalances that resulted in drastic public expenditure cuts and failure to import critical goods such as fuel, fertiliser and drugs.

For the record, fuel supply has been erratic since late 2008 largely due to shortage of foreign currency widely attributed to poor prices for the country’s major foreign exchange earner, tobacco, which accounts for over 60 percent of foreign exchange earnings.

To fill the holes, government embarked on an ambitious zero-deficit budget (ZDB), a good idea in essence as economic independence gives dignity. But because it was apparently implemented out of frustration, the ZDB proved widely unpopular as it created numerous taxes that hurt the economy with both industry and consumers crying foul. Some people have become jobless because their companies have either closed shop or reduced production due to a combination of factors such as forex and fuel shortages and increased taxes.

Now that the IMF has asked our key donors to unlock millions of dollars in budget support being withheld to support the forthcoming financial year as authorities negotiate for a new financing agreement with the Fund, I see some hope.

Indeed, I can only hope for the best now that the AfDB says it is “willing” to provide $45 million in budget financing for Malawi to help new President Joyce Banda revive the struggling economy.

With the renewed goodwill from our development partners, the challenge, like I said the other day, is for the country to work on the shortfalls on the political and economic governance front, get back to the derailed Extended Credit Facility (ECF) programme or seek a new scheme with the IMF.

It is important to appreciate that Malawi, under the late president Bingu wa Mutharika (may his soul rest in peace) who was laid to rest on Monday this week, registered some of its highest economic growth rates when the country had an economic programme with the IMF between 2006 to 2010. But from last year or thereabouts, the economy went on the downward spiral when the IMF programme was suspended.

Partnerships are important.