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Chuka dates Socam, upbeat about future

Chuka:The storm is fairly under control
Chuka:The storm is fairly under control

Reserve Bank of Malawi (RBM) Governor Charles Chuka has commended the Society of Accountants in Malawi (Socam) vision for an economic glory, as being desirable because it defines a future with the highest welfare possible for all Malawians.

Chuka, speaking at the 2013 Socam Annual Lakeshore Conference in Mangochi, hailed the accountants body for envisioning a future in which almost everyone will be economically employed and earning  living incomes with equitable access to public services.

“You are envisioning a future in which the highest possible human development is achieved. As an example of such a country, the closest I can think of is perhaps one or two Nordic countries, Norway or Denmark,” he said, at a function that attracted more than 500 accountants from the public and the private sector.

Chuka, however, said that vision is possible but quite ambitious because Malawi is yet to build the necessary institutions necessary for achieving such a vision such as appropriate political system, prevalence of the rule of law and economic governance institutions accountable to the public.

The governor recalled the ‘perfect storm’ the economy went through which began as way back as 2010.

Malawi’s economy, according to Chuka, grew at less than an average of five percent per annum between 1998 and 2005, largely thanks to the Farm Input Subsidy Programme (Fisp), and thereafter, expanded consistently at about seven percent between 2006 and 2009.

He said indications that all was not well began to appear in 2010 with Fisp increasing the country’s import volumes and demand for foreign exchange.

“While other not-traditional exports grew, the net impact of Fisp was a widening trade gap as maize—the biggest beneficiary of the programme—has always been subjected to export controls. Growth in rural incomes also resulted into increased consumption levels, especially of imported goods,” he explained.

Chuka noted that the growing trade imbalance continued at a time donor relations soured, largely due to failure to reach agreement with the International Monetary Fund (IMF).

“The resulting shortages in foreign exchange crippled the economy through rampant shortages in the supply of critical imports for industry and public services,” he said.

By  2011, industries were operating at just about half of their capacities with the fiscal situation not helping matters as government domestic payments arrears and domestic borrowing reached unprecedented levels, and inflationary pressures intensified, although headline inflation accelerated slowly into double-digit territory.

The exchange rate of the kwacha became overvalued during the period, with the parallel market offering a premium of between 60 and 80 percent and by April 2012, the country’s official reserves were about $120 million (K44 billion), or 0.6 months of imports, against external payments arrears were in excess of $600 million (K222 billion).

Outgoing Socam president William Matambo noted this was the last conference under the banner of Socam, saying next year the conference will be under the Institute of Chartered Accountants (ICA).

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