The depreciation of the kwacha, rise in fuel prices, the increase in the bank rate and subsequent increase in the price of goods and services do not give much hope that Malawians’ lives will improve any time soon. For the majority, the harsh economic climate is perpetuating their poverty.
What is worse is that government seems to have run out of ideas on how to improve the economy. Government is always looking for donors and foreign investors to support the economy. They pin their hopes on multilateral institutions such as the IMF, World Bank and the donor community for ‘economic bail out’. This has rendered Malawi a hopeless nation where leaders fail to come up with tangible solutions to solve economic problems.
Experience has shown that our leaders are actually creating problems for the people instead of solving them. One of the problems is the adoption of unsuitable economic policies. Leaders abandon ordinary people when voted into office to pursue their own agenda and listen more to what donors are saying. To put it bluntly, the adoption of neo-liberal economic policies has been to the detriment of the economy and the people.
Both government and the Reserve Bank of Malawi (RBM) have been told on several occasions against adopting an exchange rate that only succeeds in driving inflation. You do not float your currency if you do not have adequate foreign exchange reserve to back it. But they never listen. The floating exchange rate regime will not work as long as Malawi does not have adequate foreign reserve to stabilise the kwacha. Why is government and RBM clinging to a policy that is only accelerating poverty among the poorest of the poor? Are ministers or central bank officials visiting shops to check how expensive items are?
One would have expected the central bank to adopt an exchange rate regime that reflects local conditions. Everyone knows that when the tobacco season is over, there is shortage of foreign exchange on the market. But the question is; what is government doing to solve the problem? For example, a bag of cement in Mzuzu has been increased by K2 500 from K5 500 to K7 500, representing an increase of 46 percent. The question is: who is hurt?
Suffice to say that the 45 percent salary increase civil servants received has been wiped out. It is back to square one, if not worse. Government can as well forget its programme to subsidise iron sheets and cement for poor people because the impact will be very minimal in view of the escalating price of building materials.
With the zero-aid budget, a lot of services will be hiked. Already the passport fees have been increased to unreasonable amount. From the look of things, government wants to finance the budget by overburdening people with taxes. There is a need to seriously look at other means of financing. As a long term measure, President Peter Mutharika and his ministers must discuss what local investment government can embark on. They should not be pre-occupied with the donor community, foreign investors or IMF for assistance. Government’s decision to start an investment bank is a wise one. But more investment is needed to generate revenue. For example, government should transform Malawi Savings Bank (MSB) into a well-run commercial bank, start a cement factory to create competition and bring down prices and build huge hotels along the lakeshore to boost tourism. Meanwhile, government should abandon the floating exchange rate regime until Malawi has built enough foreign reserves. Government must listen or millions of Malawians are doomed!