MPs look away as Gwengwe sells debt dummies

So, on Wednesday, the National Assembly passed the K2.84 trillion National Budget for the 2022-23 financial year largely unchanged ahead of the re-adjusted financial year that will now start on April 1 instead of July 1 as it used to be.

Clearly, Finance and Economic Affairs Minister Sosten Gwengwe must be pleased with himself, having shepherded his first fiscal plan through the House without much resistance.

Of course, with the sweetener that was the increase in the Constituency Development Fund (CDF) by 150 percent from K40 million to K100 million, parliamentarians were baited hook, line and sinker.

They could not scrutinise the largest problems of this budget—piling national debt—without drawing attention to the fact that their own irresponsible increase in total CDF from K7.72 billion per year to K19.3 billion now is part of the reasons the country is in so much debt.

Chances are also high that the money into the constituency fund will likely be borrowed from the domestic market at high interest rates (double digits), making the total cost of CDF even greater than we have been fed to believe.

And when you add the fact that several reports, including those of the Auditor General, into the accounts of local authorities, showing that CDF is the funding window most prone to abuse, fraud and outright theft, you do not need an economics degree to realise that there is very little value for money in this bogus, vote buying bounty that the political elite are using to control the poor’s minds.

Yet, it is not so amazing how the MPs could not challenge Gwengwe to come up with a better plan to meet the challenge of low economic growth. It is understandable why Gwengwe got away with the twin crises of high debt levels and deteriorating fiscal performance without a scratch.

I am not surprised they have passed a budget without seeing a clear plan for the rising cost of living hurting Malawians nationwide. The golden CDF handshake gets some credit.

What makes it worse is the uselessness of the excuse of an opposition party called Democratic Progressive Party (DPP) now led in Parliament by Kondwani Nankhumwa, which has zero alternative plans.

Sure, in response to the budget, DPP rattled out a few generations and platitudes, but they had no dueling fiscal plan of their own. The only plan Nankhumwa had as an alternative to the Lazarus Chakwera administration’s budget was his party’s seating plan and a hilarious shadow Cabinet.

But even that seating plan and comical shadow Cabinet crumbled all around him. Nankhumwa and his bunch of opportunists in the House could not muster enough clout to question Gwengwe’s so-called strict fiscal consolidation policy.

DPP could not hold the Executive to account on the nature and scope of the fiscal adjustment government is pushing and how that will help or hurt people, especially the poor and for how long.

Gwengwe has even gone on to secure his budget without being taken to task on how he will bring down the national debt. I guess the MPs were satisfied with the vague plan that Gwengwe presented to them in his budget statement.

“My Ministry will intensify efforts to refinance all expensive and near-maturing debt using cheaper debt to create fiscal space. This will enable Government to have resources for financing exports enhancing projects such as in the mining sector”. I mean, what is that? He will refinance all expensive and near-maturing debt using cheaper debt to create fiscal space?

This man was basically saying he will borrow more from Jack to pay John and later on borrow again to make Jack happy. To me this sounds like the vicious cycle that a katapila addict goes through. Now, how sustainable is that? In any case, where will Gwengwe get these ‘cheap’ loans?

Multilateral lenders such as the World Bank, the African Development Bank and the International Monetary Fund are the cheapest that I know. But, first, they won’t lend you to pay off your irresponsible spending. Second, when they lend, it is largely for specific projects they want to fund and they exert tight fiduciary control on their money that is why it is earmarked. And third, given Malawi’s low debt carrying capacity, they cannot lend the country that much.

So, who is next on the list of Gwengwe’s childish debt plan? The import-export banks of China and India? Forget them—they are some of the most expensive on the global financial platform—and very ruthless.

Meanwhile, as Gwengwe will try to borrow on the ‘cheap’ to service current loans, he also has to look for more loans to cover the K884 billion budget deficit for his new budget, which is up from K718 billion in the outgoing financial year.

To say the truth Gwengwe has sold this country a dummy on debt management. And he has the people’s representatives—legislators—aiding and abating him!