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Home Columns Economics and Business Forum

Who will save Malawi?

by Johnny Kasalika
07/09/2012
in Economics and Business Forum
3 min read
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The Malawi economy has declined suddenly from the much-acclaimed growth rates of the late president Bingu wa Mutharika.

It was only in the local press that I read of Malawi’s world class performance in GDP growth rates. It was said that Malawi was second only to Qatar.

Today, our country is in a sorry state. It has been so almost from the year the recessions reached their peak in the developed western world.

All the time, those in charge of the country would talk as if all was well. Now the country is riddled with strikes, some wildcats, others foreordained.

The same people, who criticised Mutharika for hesitating to devalue the kwacha in bigger dosage as the International Monetary Fund (IMF) and other donors wanted, are now fuming at President Joyce Banda for devaluing the local currency to the extent preferred by donors. They accused Mutharika of perpetrating the foreign exchange and fuel problems.

That devaluing the kwacha has been a factor in easing fuel shortage and resumption of funds that were withheld has brought the five-old moth presidency no plaudits.

Mutharika saw clearly that massive devaluation would be followed by double digit inflation. Some of those who are yelling and wailing against Banda seem to suggest that the inflation was unexpected and that she had done nothing to prepare for the consequences. This is wide off the mark.

Just before his sudden passing away, Mutharika softened his opposition to devaluation by seeking assurance from the development partners that they would provide cushion to vulnerable Malawians.

When Banda assumed the mantle, she did in fact obtain cushioning in form of safety nets such as Transfer Programme.

What has come as a surprise and a most painful one is that it is not the most vulnerable who are driving the government and employers to the wall, but those who can afford some sacrifices.

The most unbearable sacrifice is to go to bed without supper. Are middle class people such as university lecturers really facing starvation?

Are they finding it impossible to buy enough bags of maize, flour or rice to last them for a month?

Malawi is heading for the precipice. If Malawi reaches a stage where one country in the Sadc region reached and suffer the agony Greece is writhing with, the blame must be placed on two categories of people.

First, the well-educated who use their knowledge to pursue their interests without adequate regard to the needs of other stakeholders of the economy.

Secondly, the blame must fall on people, who through ignorance and myopia, are destroying the environment.

Let us talk about the highly-educated ones first. Surely, they know that the aim of devaluing the kwacha was to cheapen our exports on the international market so that we sell more goods and earn more foreign reserves.

Why has these expectations not been realised yet? The economy of Malawi is built on primary commodities tobacco, sugar, tea, cotton and maize. These are seasonal crops.

Devaluation helps exports when you produce more. In April when the new government started, it was the beginning of the dry season.

The country will have to await the onset of the rainy season to plant and produce more commodities for the international market.

The economy as it is at present has not yet realised the expected growth rates. To this extent, it does have resilience to accommodate salary hikes. How much milk can you expect from a scrawny cow?

Most well-educated people, especially those with more than modicum knowledge of economies, are aware of the postulate called opportunity cost.

This states that because of the limited means that an average person has whenever he or she buys one thing he at the same time foregoes another.

You may have enough money to pay for your daughter’s education at a private school, but not at the same time to buy all the other things you would like to have. To get one thing, you must postpone or give up the other.

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