Gondwe must now save his legacy
Lest we forget, it was Goodall Gondwe—as Minister of Finance—who, soon after Bingu wa Mutharika came to power in 2004, engineered the International Monetary Fund (IMF) staff monitored programme for one year to establish a sound fiscal footing that successfully became the basis for a new and highly consequential IMF-supported programme.
It was that foundation that led to debt cancellation under the Heavily Indebted Poor Countries (Hipc) and Multilateral Debt Relief Initiative (MDRI).
With roughly 90 percent of the debts cancelled in 2006 and supported by a consistently performing IMF programme, Malawi achieved one of the highest growth rates in the world—averaging seven percent over four years, managed to consolidate its public finances and attained a sustainable debt situation which, of course, began to worsen again after 2009.
But I digress because I have written about this debt issue recently.
The point I am trying to make is that Gondwe pulled Malawi from the brink before and had a successful five-year spell between 2004 and 2009, at some point becoming Africa’s best finance minister.
Having won back a programme with the IMF after Malawi had stayed five years without it, Gondwe never lost it until he was moved post-2009 elections to a portfolio he was never suited for.
He has won the IMF programme back, again. Does he still have the will to keep it, cement his legacy and prove his detractors wrong that age is but a number as long as the brain still ticks?
He should because he has nothing to lose politically. With his team at Treasury and some strength from President Peter Mutharika to bite the lower lip, we are now seeing some green shoots that the fund is now recognising.
The IMF team, led by Oral Williams, which came for the seventh and eighth reviews under the Extended Credit Facility (ECF) arrangement, had some glowing words, albeit with some caveats, naturally.
“Regarding programme performance, the authorities have demonstrated a concerted effort to put the programme back on track. Programme targets on net domestic financing and net domestic assets of the Reserve Bank of Malawi for end December 2015 were met.
“However, the build-up in net international reserves fell short of the end-December programme floor owing to lower-than expected export revenues and some smoothing of the excessive volatility in the foreign exchange market. On the structural side, reforms in the financial sector were carried out as planned. Improvements in public financial management [PFM], in particular bank reconciliations, are gaining momentum, but this needs to be sustained,” said the IMF in a statement issued at the end of the review.
Clearly, the fund had taken into consideration the lagging effects of drought and floods; the hunger situation that has left nearly three million people in need of food aid and how these impacted on economic growth and the meeting of some targets.
With inflation falling slightly and the kwacha beginning to gain, things could be looking up for Malawi.
But if State House and Capital Hill are popping champagne all over the place, someone should tell them that this is just a step, just one step. The hardest part will be to sustain this momentum and improve on this. The 2016/17 national budget presents an opportunity to send strong signals of the intention to do much better.
Gondwe still has a responsibility to reign in on careless government spending even as he strives to scale-up public investments to stimulate the economy.
He must bring down the cost of living and achieve sustainable stability to the exchange rate. And, for goodness sake, bring down interest rates!
To achieve that he must be strong enough to tell his colleagues in Cabinet that he will not sign cheques whose purposes are merely for their political comforts.
He must tightly control the travel budget, one of the greatest drainers of public funds. Above all, he must fill holes in PFM that have brought the country so much pain, scorn and international embarrassment.
Above all, he must strive to have the next budget aim at taking back the country to growth rates that are high enough to make a dent on poverty.
A reasonable balance must be truck between spending on critical social sectors such as health and capital outlays such as on public infrastructure. All this requires courage.
But come to think of it, Gondwe is probably the only person with the right motive for taking tough fiscal decisions without worrying about personal political fallout: he has a strong legacy to protect and I doubt he has any further political ambitions to worry about.
In fact, I suspect that as soon as he is convinced he has achieved the fiscal balance the country needs, he will retire voluntarily—with his legacy restored, even enhanced.
