Dust has now settled on the euphoria that characterised President Joyce Banda’s first 100 days in office which she clocked on July 15 2012. Much has been said and written about JB’s first 100 days; hence, I will not belabour you with that.
In April this year, barely days after JB ascended to the presidency after the death of president Bingu wa Mutharika, I wrote that there was “no honeymoon” for the President as she had a task ahead to rebuild a country hitherto haunted by economic and political turmoil over the past three years. Hence, she had to get down to work as a matter of priority.
Problems facing the country then included shortage of foreign currency, the root cause of the never-ending queues for fuel and other basic commodities that were the order of the day since late 2008. Unreliable power supply was and still is yet another setback.
JB faced the challenge of reclaiming donor confidence through getting back on the derailed economic programme with the International Monetary Fund (IMF). Within the 100 days, Malawi now has a new programme with the IMF. The country has also convinced the US-government’s Millennium Challenge Corporation (MCC) to win back the $350 million grant to fine-tune the energy sector. Several donors have also taken the cue from an earlier IMF assurance to unlock aid taps to Malawi.
However, rising insecurity is threatening people and businesses. Something needs to be done.
Barely one month into office, JB’s administration devalued the kwacha by 49 percent. This development saw a review of the bank rate which has increased the cost of borrowing money. Within 100 days, the base lending rate has been adjusted upwards three times.
Today, banks are struggling to raise enough money to lend prospective borrowers. This struggle is evident in the many consumer promotions currently underway to mobilise deposits or savings from customers. Nearly every bank is dangling some prize for customers who save over an agreed period.
With base lending rates hovering around 30 percent or so, from about 18 percent barely 100 days ago, my fear is that there could be a high default rate on loans as, in practice, most borrowers’ incomes have not been adjusted upwards yet they have to dig deeper into their pockets to service loans. Something ought to be done between customers and banks to strike a win-win situation.
I hope we will not go back to the early 2000s when base lending rates were as high as 50 percent-plus. That was suicidal. I still recall how thousands lost jobs after giant firms closed shop.
It is said that to get well, one should endure swallowing bitter pills. I pray that the pills will not be even bitter than the ones we are swallowing now. But, from a distance, I foresee even tougher times ahead.
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