Every time power changes hands, temptations are high to change the way the previous administration used to do things, especially on the economic management front.
Not that there is anything peculiar about that. After all, in most cases, political parties in power usually have different goals and policies to implement; hence, they opt for change that will facilitate achievement of their ideals.
In The Nation Business News of Tuesday this week, Minister of Finance and Economic Planning and Development Goodall Gondwe said he has a meeting this Friday with Reserve Bank of Malawi (RBM) Governor Charles Chuka on the kwacha or exchange rate management in general.
I am not a prophet; hence, I do not want to mislead you with a false prophesy. However, from a distance, given the hinted subject of the meeting, one can easily conclude that good ol’ Goodall would likely want to use the meeting to outline the Democratic Progressive Party (DPP) administration’s policy.
In fact, in the preview story, Goodall has hinted that the new administration would go for an exchange rate policy that is in the best interest of the country, whatever that meant since he did not elaborate. Perhaps, that is a story for after the actual meeting.
Currently, the country is using a flexible exchange rate policy introduced by the People’s Party (PP) administration led by Joyce Banda (aka JB) in May 2012.
It is a fact that JB and PP’s flexible exchange rate regime heralded by the 49 percent devaluation and subsequent flotation of the kwacha was a bitter pill to swallow for many Malawians.
However, at the end of the day, like the case of a patient feeling pain but has to endure swallowing a bitter pill to get better, things worked out. For example, the economy that was hitherto unable to import critical commodities such as fuel, drugs, fertiliser and raw materials was now able to have these in abundance, clearing arrears with foreign suppliers in the process.
Besides, the harsh devaluation and flotation of the kwacha eventually worked to help reduce imbalances in the foreign exchange market as forex moved or was “mopped” from the parallel market (black market) to the official market.
Given this context, I must say that any policy reversal such as fixing the kwacha would be to the detriment of stability. Petty politics aside, what is needed now is to consolidate what PP policies achieved, especially at macro-economic level, and blend with DPP policies that can take this country further ahead. We should, at all cost, avoid experimenting with people’s lives through willy-nilly policy changes.
Now, talking about subsidies, I subscribe to the school of thought that through subsidies, politicians tend to score political points while exerting an unnecessary burden on the country’s few compliant taxpayers. There is the Farm Input Subsidy Programme (Fisp) whose beneficiaries cannot graduate to independence year-in and year-out and now we are talking about cement and iron sheets subsidies.
There is a saying on making man independent which says “teach someone how to fish, they will eat fish all their life” as opposed to giving them fish every day. The latter will only succeed in making them perpetual beggars.
I believe the solution lies in creating more jobs by facilitating an enabling environment for increased foreign direct investment (FDI) or indeed stimulating the local manufacturing industry. >From that point, the people employed will use their earnings to buy their needs such as iron sheets, cement or fertiliser. They will no longer survive on subsidies, which are a heavy burden on the budget and the few people who pay taxes.
From 2012, Malawians have learnt to pay the full cost or market price for fuel and electricity. In fact, studies show that many consumers are willing to pay more as long as there is efficiency and ready supply.
So, good ol’ Goodall and team, as you take charge of the economy, please bear in mind that things should not be fixed for the fun or sake of it. Please avoid the temptation to fix that which is not broken.