FDH Financial Holdings Limited chief executive officer Thom Mpinganjira on Friday stunned a post-budget meeting convened by Finance Minister Dr. Ken Lipenga with his analogy of the ailing Malawi economy which he said was in intensive care unit (ICU) in the recent past.
ICU is a special department of a hospital which accommodates patients with the most serious injuries and illnesses, most of which are life-threatening and need constant close monitoring and support from equipment and medication to maintain â€˜someâ€™ body parts functioning.
“We were in the ICUâ€¦the price of US dollar was static to the extent that there was no forex in the market. A lot of companies closed and this made MRA actually to underperform as it failed to meet the target,” said Mpinganjira.
Prior to August last year, the kwacha was selling at K152 to a dollar for years, which induced an appetite among most Malawians to import more goods and services as imports were cheaper, a situation that led to the drainage of foreign currency on the market.
As a result, most companies engaged in actual production of finished goods were left with no choice but to shut down or downsize staff leading to most Malawians losing jobs in the process.
Mpinganjira noted that most of the imports that drained Malawi foreign reserves were in the category of luxury goods as compared to critical goods such as medicine and plant or equipment for actual production.
“The main source of domestic revenue is tax revenue and this comes from companies but we saw that a lot of companies closed and as a result MRA [Malawi Revenue Authority] was actually made to underperform,” added Mpinganjira who is also board chairperson of MRA..
However, Mpinganjira acknowledged that currently the closure of shops has been reversed as companies and individuals are accessing forex in the aftermath of the 49 percent devaluation of the kwacha, on 17 May, 2012 and subsequent floatation.
Lipenga thanked Mpinganjira for his suggestions and input into the budget, but stressed that the 2012/13 budget strikes an appropriate balance between promoting economic growth and ensuring that the benefits of growth are shared by the poor.
“The budget strikes an appropriate balance between generating incentives for investment, investing in education, health, nutrition and HIV prevention and care,” he said.