To the Tonse Alliance administration’s failure to fulfill campaign promises and for being rated poorly in its fight against corruption, can now be added one more debilitating problem. This is forex shortage. Now, shortage of forex cripples everything. One can only hope and pray the situation does not get worse as to reach the heights experienced in 2012 when the country literally collapsed because it could not import fuel into the country.
The Tonse’s failure to deliver on its myriad promises is now a tired song that hardly needs drumming further. The one million jobs that the alliance partners promised to create in its first year in office have only been conspicuous by their absence. The Covid-19 pandemic that is usually blamed for the poor showing on its promises, is only a good excuse. The promised three meals a day have so far been a far cry to achieve as over 1.7 million Malawians this year need food aid. Last year over a million were food insecure. The Tonse’s Malawi wokomera tonse mantra has just turned out to be an empty song as poverty levels have not only worsened with prices of basic commodities rising every day, there is no hope in the foreseeable future of turning the corner.
And just when the country was beginning to show signs of taking the fight against corruption to its perpetrators, the ruthless beast is back in the stable fighting back with reckless abandon. Capitulation seems eminent.
Now, on top of all these problems, is forex shortage. The country’s gross official reserves—under the direct control of the Reserve Bank of Malawi (RBM)—stand at $374.48 million, or 1.5 months of import cover, according to Reserve Bank of Malawi figures. What should be more worrying is that this is a drop from $429.17 million, an equivalent of 1.72 months of import cover recorded in last quarter of 2021.
It all started with fuel importers failing to bring fuel into the country because forex was in short supply. Over the past few months, fuel importation has been at the mercy of commercial banks. This was soon to be followed by pharmaceuticals not being able to import drugs because of the same problem.
Cooking oil manufacturers were next in line to be affected by the shortage of forex resulting in the scarcity of cooking oil in the shops. Air lines have not been left out of the fiasco. This week they were either charging in dollars or for not wanting to be on the wrong side of the law, suspended ticket issuance altogether in the Malawi market because difficulties to repatriate foreign currency. Those wishing to travel have to buy tickets from foreign based agencies.
Who is next in line to be affected? There are thousands of small scale businesspersons such as second hand car dealers and spare parts importers who need forex for their businesses which are their livelihoods. It is not far-fetched to conclude that if this trend continues, sooner rather than later, every sector will collapse.
Ironically, this is the tobacco selling season, when ordinarily, the country is supposed to have forex in abundance. But if it is in short supply now, when we are selling our green gold, what will happen in October? Where will government get forex for fertiliser?
Forex shortage is coming at a time all the macro-economic fundamentals are going south. The beginning of the harvesting season in some parts of the country such as in the Southern Region failed to contain inflationary pressure last month when headline inflation jumped to 15.7 percent from 14.1 percent in March. According to the National Statistics office, both food and non-food inflation remained elevated in April. Non-food inflation rose to 12.2 percent from 10.5 percent largely due to the 22 percent fuel price increase in mid-April 2022. On the other hand, food inflation increased to19.5 percent from 17.1 percent in March 2022.
With this unfavourable economic situation, of interest to the 18 million Malawians are interventions to alleviate the suffering on the people. They want three square meals a day as a minimum. Government is at liberty to blame the bleeding of the economy on anything including exogenous forces such as the Ukraine-Russian war. But as an elected government, it has an obligation to tame the tide. The country is heading into a crisis if not already into one. Pray things won’t get worse before a turnaround in the economy.