‘More prudent fiscal, monetary policies for Malawi’

Dumbani Mzale talks with Malawi’s Finance Minister Dr Ken Lipenga on the state of the country’s economy.

What is your general assessment of the current economic situation in Malawi?

As you are aware, the economy has not been performing well for almost two years now. The new government decided that this could not go on and took bold steps to address these macroeconomic imbalances.

Government could have decided to continue with the way things were, but we knew that could have resulted in the economy going to into a deeper recession. We, therefore, decided to undertake reforms to bring the economy back on the path of growth. These reforms will take time to work. It should be understood that the economy experienced serious setbacks for two to three years and things cannot just return to normal within three or four months.

What is your overall assessment of the recently implemented economic reforms?

These reforms were undertaken to restore macroeconomic balance. They are a sensible response to a very bad situation. Before the reforms were undertaken, the economy was facing major economic challenges resulting mainly from an over-valued exchange rate which may have benefitted a few people, but was extremely harmful to the majority of Malawians.

You really don’t need a Phd in economics to realise that the overvalued kwacha was a bad idea and merely a postponement of the day reality would come crashing in. At that time, most of the people already knew that to bring the economy back on track, something had to be done to the exchange rate regime.

There have been mixed reactions on budget support this year with some people suggesting that some donors are chickening out of the issue. What is your say on this?

Each year, before coming up with the budget, we consult our development partners and they provide us with their pledges for budget support in the upcoming financial year. The information provided includes the amount pledged and the time of disbursement. These pledges are then factored into the budget as general budget support. Four donors committed to provide funds for budget support this year. Contrary to what is being alleged in certain sections of the media, let me point out that all the donors have their pledges and all the funds that were earmarked for the first quarter were disbursed. We have been assured that funds for the other quarters will be disbursed as pledged; therefore, the budget and all the expenditures that were earmarked for these funds will not suffer, certainly not on account of the failure of development partners to support us.

Last week, one of Malawi’s influential donors, the World Bank, described the state of the economy as still fragile. Do you agree with this assessment?

As I have already mentioned, the country was distressed for a long time. It would be a miracle for everything to return to normal in just three months and if that happened, then the President, myself and the officials at my ministry would probably be strong candidates for a Nobel Prize.

Last week, the Ministry of Economic Planning and Development said the country’s economy will recover within 18 months, but some Malawians have expressed doubt on this projection. What is your take on this?

It takes time for an economy to recover from the situation that we were in. We are working around the clock to ensure that the recovery period is less than normal. However, government will do everything with available resources to cushion the most vulnerable of the population during this recovery period. 

You projected an average annual inflation rate of 18.4 percent earlier and, as we speak, headline inflation rate stands at 25.5 percent. Do you see your earlier target being met?

Indeed, we were concerned with the increase in inflation during the month of August. As government, we are always observing developments in inflation and we will ensure that we continue with prudent fiscal and monetary policies as this will assist us to contain any inflationary pressures. As of now, we think we might still achieve the target, but we will continue observing developments in the coming months and ensure that there is price stability.

 

Malawians are complaining about rising commodity prices and the general rise in the cost of living. What is government doing to cushion Malawians from high commodity prices?

Government has put in place programmes to support the most vulnerable. The ideal situation would have been to have everyone cushioned, but you know that needs resource levels that we simply do not have. We do care about the well-being of all Malawians.