‘Recovery budget has been difficult to implement’

On Friday, this week Finance Minister Ken Lipenga will be presenting the 2013/2014 national budget in Parliament. With an economy still struggling to stabilise and grow, EPHRAIM NYONDO caught up with the minister to shed light on how the journey has been with the 2012/2013 austerity budget and its implication on the 2013/2014 budget.

The 2012/2013 budget was geared mostly on the recovery side. As we are about to enter another fiscal year, at what level has the economy recovered?

Principally, what we intended to do with the 2012/2013 budget was to stabilise the economy. We wanted to contain inflation and, in the process, bring everything to normalcy. You know we were coming from the background where the economy was in a mess. Worse still, the situation was even aggravated along the way by food shortages. You know food, especially, is a critical factor that pushes inflation up in the country.

I can rightly say here that there are reasonable signs of recovery in the economy. There is a tremendous feeling of confidence in the private sector. Kwacha is appreciating and we have just experienced prices of fuel going down. I am sure things are getting under control, thanks to the policies we put in place.

What was it like when people rose up to demand salary increments that government did not budget for, and how did government cope?

Things are really changing on the economic side, but these changes have not been achieved on a silver platter. The challenges were enormous. It is beyond expression that when you devalue the kwacha, you expect the cost of living to go up. And we, as government, understood that Malawians deserve better, that is why they are demanding redress. We worked with various partners to at least come up with something to cushion the people from adverse effects of devaluation. I am glad the international community responded well; that is why we were able, through dialogue and understanding, to make certain measures to help our people. But I should also take this opportunity to tell Malawians that when you devalue your currency, it does not mean that you should demand a salary increase at the same rate of the percentage of devaluation.

Such a move would force government to start spending beyond its means. And the consequences, we all know, are drastic. In a nutshell, this was a difficult budget to implement. It was a recovery budget which means something needs to be put on hold. I am glad a number of Malawians gave us support.

Some economic analysts have argued that government should not interpret the appreciation of the kwacha as a sign of recovery because it is happening at a time when there is enough maize and sales of tobacco. What is your comment?

I have heard such views, but my immediate reaction was ‘is it new?’ It is well known that the structure of our economy is seasonal. But what we should mostly not forget is that if the fundamentals were not right, we would not have been experiencing these positive strides in the economy. Good tobacco sales is a sign of a sound policy. We have had tobacco sales before, but it hasn’t been as rosy as it is.

Our ambition is to make sure that we weaken the lean season. We need to work together as Malawians so that we find ways of weakening this season. As government, this is the reason we spearheaded the National Export Strategy (NES) so that we scale up manufacturing and exports. The fundamental challenge we have as a nation is that regarding balance of payment. We need to kill this lean season. I know, of course, that this cannot be achieved in a year. But it is something which can be achieved. We have stayed behind for so long when our friends are advancing. We need to pull our socks and move ahead. This is the message you get from the Economic Recovery Plan (ERP).

In her State of the Nation Address, President Joyce Banda underlined that although there is a flicker of hope in the economic recovery, Malawians should still brace for tough times ahead. Does that mean we will still continue with the austerity budget?

We have not recovered fully, let us not forget. As such, we cannot start thinking of changing policies. We still need to travel the same road because it has shown that is good for the economy. Prices of fuel have gone down, for instance, and we expect prices of other goods to go down as well. It is in this vein that I should call upon civil society leaders who champion the cause of the people to begin to appeal with merchants and companies the possibility of price adjustments. If fuel prices are going down, the kwacha is appreciating, I think we need dialogue as well on reducing commodity prices.

Any other comments?

Let me join the President in thanking Malawians who, in the face of tough economic times undertook, understood and supported their government. Economic policies should be tailored with the interests of people in the long term. If you devise policies just to please a few people in the short term, the consequences are drastic. We have hope in our economy, and I have all the reasons to say that Malawi, a country of hard-working people, is capable of becoming a five-star performer just like Rwanda. And we are heading there.