Members of Malawi’s Budget and Finance Committee of Parliament on Saturday took the visiting IMF managing director, Christine Lagarde, to task for pushing Malawi to devalue the kwacha by about 50 percent, saying the decision has hurt Malawians.
The MPs raised the concerns during an interface meeting Lagarde held with Parliament in the capital, Lilongwe.
“The IMF has been consistent in its advice for a devalued and floated currency. The short-term negative effects are visible on the Malawi people and we are told that the medium to long term will bring economic recovery. I wish to know the position of the body on the causes of the high inflation, at a time when the economy should be showing signs of recovery.
“We tend to wonder what sort of recovery path the Malawi economy is going through because inflation is around 33.3 percent against the projected rate of 18.4 percent,” queried Lilongwe Mapuyu South MP (MCP) Joseph Njovuyalema.
Balaka South MP George Nnensa said IMF needs to provide corrective advice to prevent the current austerity measures from further affecting economic productivity.
“The Malawi situation is helpless, as immediate solutions being provided are further creating problems to the poor. Reduction in expenditure is hurting more the poor as they cannot access certain services while increasing production is also a challenge as not many organisations can afford that in the face of depreciation,” said Nnensa.
In her response, Lagarde said Malawi is not heading for recession, but is going through difficult times.
“Devaluation of the currency was and is indeed tough and hard on people. But if you consider critically what was during the first quarter of 2012, and now, you will notice that things are changing and it’s a good path to follow.
“Heavy imports made Malawi suffer much as black market forex rate was 80 percent valued than the official rates. The better option was for the country to devalue the currency so as to stabilise the situation,” said the former French finance minister.
Speaking later in the day when she addressed the business community at Crossroads Hotel, Lagarde said the country is still ‘vulnerable’ and is yet to live up to its full potential.
“As IMF, we come as a friend of Malawi and as a friend we have to tell Malawi the truth. Your country is about to celebrate 50 years of independence. There has been good years and bad on the economic perspective, but the country has not lived up to its potential,” she said.
The IMF boss also said although the country has over the years registered robust economic growth rates, growth has not been inclusive, saying this has deepened poverty levels among most Malawians.
“Today, agriculture accounts for over 30 percent of GDP and if you look at tobacco, it accounts half of total export earnings. Malawi and its people are still vulnerable to forces of nature and to global economic shock,” she said.
However, Lagarde sounded positive that Malawi is ‘on a tipping point’ and ‘rebirth’ in the course of implementing economic reforms.
On Friday, Malawi President Joyce Banda assured the IMF chief that the country not will change course on economic reforms.