‘Malawi should think beyond aid’

Malawi has to wean itself from donor dependence because budget support alone is not a solution to the country’s economic problems, new British High Commissioner Michael Nevin has said.

Speaking in an exclusive interview after visiting and holding talks with Nation Publications Limited (NPL) senior editorial management on Wednesday, Nevin said the Malawi Government must stick to the economic recovery plan, focus on growth and cut unnecessary costs.

He, however, noted that the recovery process will take some time for Lilongwe, referring to the current three-year Extended Credit Facility (ECF) that Malawi signed with the International Monetary Fund (IMF) this year.

He also reiterated that the United Kingdom (UK) Government is implementing an austerity budget in which they are also cutting unnecessary costs.

“We, too, are trying to cut costs while at the same time trying to stimulate growth, and that means looking for trade and investment opportunities,” he said.

The Joyce Banda administration has proposed to implement an 18-month Economic Recovery Plan (ERP) expected to be launched in Lilongwe on Friday, with the hope of ensuring that the country returns on track to prosperity.

The ERP identifies areas of intervention in the immediate, short and medium terms. Some of the measures have already been implemented, including the recent 49 percent devaluation of the kwacha, setting a market-determined exchange rate and restoring bilateral and multilateral ties.

The plan also proposes to increase resource allocation to areas that would address constraints to economic growth such as energy and to those aimed at boosting production for the export market.

Nevin said the time frame to get the Malawi economy back on track will depend on Capital Hill emphasising promotion of growth and getting the conditions right for the growth.

“It [the time frame] could be faster, it could be slower, but I think most people would agree that it has only been five months [since Joyce Banda took over government] and it is going to take much longer than that before we see economic recovery, but the signs are  good,” he said.

On Tuesday, Britain’s Department for International Development (DfID) said the UK Government intends to review its budget support to Malawi before the year ends.

Nevin reaffirmed that position, saying since aid was suspended last year, they will have to conduct a review before the year ends.

Said the envoy: “It is really up to our ministers back in the UK to make the decision. But I will say that we are encouraged by some of the brave decisions made by the current government since April.

“What we are looking for is to continue that momentum, sustain the positive changes and keep to the recovery plan, keep discipline.”

‘UK won’t dictate anything’

Nevin said the UK will not in any way dictate to the Malawi Government what it has to do to get budgetary support, but that the review will look at the “overall context in which Malawi and the government is.”

This week, some economists warned that the Malawi economy will slide into a crisis due to dwindling foreign exchange reserves. Malawi requires a minimum of three months worth of import cover which is internationally recommended or about $129 million (about K39 billion) a month to satisfy its import needs such as fertiliser, fuel and medical drugs.

When asked to forecast, Nevin said, according to their analysis, Malawi is where they expected it to be.

“The inflation [currently at 25.5 percent in August] is more or less what we expected, the reserves are more or less what we expected. So, I think everyone is on track, but it is a difficult period,” he said.

Nevin—speaking at a reception on Tuesday evening in Blantyre which was hosted by British honorary consul Krishna Savjani—said London is optimistic that after Malawians have tightened their belts, retained the confidence of donors, there will be better times ahead.

National dialogue needed

He also encouraged national dialogue to help in the growth of the economy, saying the dialogue should involve the private sector, government and the donors.

“I would also encourage more of national dialogue on these issues and more dialogue in particular involving the private sector, government and the donors so that we are pulling in the same direction [and] that we can unlock all blockages to growth and economic stability,” said Nevin.

Recalling the expulsion of former envoy Fergus Cochrane-Dyet by the Bingu wa Mutharika administration, Nevin said the UK was concerned by Malawi’s downturn of governance and the economy which led to the fallout.

Said Nevin: “But like two lovers who quarrel, we realised we need each other, we want each other and we are back together.

“Obviously, after a quarrel, you need a little bit of time to build trust but I can say that in London, there is a feeling that Malawi is on a right track.”

Watch a video of the interview