Malawi President Joyce Banda has told the IMF that her administration underestimated the impact of economic reforms currently being implemented in the country.
But the Consumers Association of Malawi (Cama), who are fighting price increases and seeking public cost cuts, on Sunday argued all this is because Malawi is not making independent choices on its current economic policies.
Banda made the down-to-earth admission in her brief statement to journalists soon after meeting International Monetary Fund (IMF) managing director Christine Lagarde at Kamuzu Palace in Malawi’s capital, Lilongwe, on Friday evening.
Said the President : “We noted that the impact of the [economic] reforms was under-estimated due to inaccurate information and data that was used from the previous administration.”
Soon after succeeding the late president Bingu wa Mutharika last April, Banda’s administration introduced free market economic reforms, including a 49 percent devaluation of the kwacha and its subsequent floatation, re-introduction of the automatic pricing mechanism (APM) on fuel and deregulation of water and electricity tariffs.
The Banda administration also crafted an austerity national budget to cut on spending in the face of dwindling domestic revenues and donor aid.
The measures were part of a prescription aimed at restoring the IMF-supported economic programme in Malawi, the Extended Credit Facility (ECF), which was suspended during the Mutharika administration in 2011.
“That is why I have been able to take difficult decisions that could have destroyed my political career because I know if we did not take this route, the country could not be on the recovery path,” said Banda who was flanked by her key ministers championing the implementation of the Economic Recovery Plan (ERP).
Banda told journalists that in the short term, it is expected that the reforms will have a negative impact on livelihoods of the people.
She cited the increase in the price of fuel and foodstuffs on the local market as well as a very steep slide in the value of the kwacha which, she admitted, have all burdened Malawians.
The President told the IMF boss that such challenges may in the short-term lead to a slowdown in economic activities.
Banda also said to cushion the impact of the economic reforms, government has been implementing social protection programmes which she started late and that the urban poor were not initially covered.
In her address earlier, Lagarde reiterated the need for government to stay on course with reforms being implemented despite the pain emanating from the initiatives.
Reacting to remarks by the IMF boss—that Malawi should stay on course with the reforms and that her organisation is not imposing anything on the country—Cama executive director John Kapito said it is unfortunate the country is failing to make an independent decision.
Kapito argued that what worked out elsewhere could not work for Malawi because economies differ.
He claimed the Banda administration failed to understand the impact of devaluation and floatation of the kwacha and they continue to do so.
He said the President’s admission that her government under-estimated the impact of reforms vindicates Cama’s stand and that his organisation is not doing things out of malice.
Kapito said Malawi should not expect to come out of the ditch any time soon at the rate the country is borrowing from banks and international monetary bodies.
He also argued it is unfortunate that Minister of Economic Planning and Development Goodall Gondwe and Finance Minister Ken Lipenga, who during the Mutharika regime spoke against the devaluation of the kwacha, are now ill-advising Banda and championing the devaluation and floatation of the kwacha. He said “this is hypocrisy of the highest order.”