Malawi risks worst economic crisis
The Centre for Social Concern (CfSC) has said Malawi risks serious economic problems, including forex and fuel shortages which characterised the country towards the end of the late Bingu wa Mutharika’s rule between 2010 and April 2012.
In a press statement issued on Tuesday, CfSC social conditions research programme officer Alex Nkosi noted that Malawi lies vulnerable in the wake of the current freeze of foreign aid.
The Common Approach to Budgetary Support (Cabs)—the United Kingdom (UK), Norway, Germany, the African Development Bank (AfDB), the European Union (EU) and the World Bank with the International Monetary Fund (IMF) and the United Nations Development Programme (UNDP) participating as private observers—announcedon Thursday the withholding of $150 million (about K60 billion), due to financial mismanagement that has rocked Capital Hill.
Earlier, the IMF announced the suspension of aid over same concerns.
But the Lilongwe-based faith organisation, CfSC, notes that the situation is further worsened by the fact that the country is approaching a farming season during which farm inputs are imported.
Said Nkosi in the statement: “The farm input imports may lead to a serious erosion of our import cover and being a lean season, prices of food commodities, especially maize traditionally go up. This year the situation is further compounded by the fact that the country is facing hunger.
“These challenges pose the potential of further leading to a growing fiscal deficit, rising inflation and the depletion of forex reserves which inadvertently will impact the lives of poor Malawians.”
The CfSC notes that given this dire situation, it agrees with the donor community that government should revise its budget, alter budget lines that we can do without as a country and put the money where it is necessary.
However, the Ministry of Finance has so far said the determination on whether to revise the budget or not awaits the IMF mission which is currently in the country.
The ministry’s spokesperson, Nations Msowoya, noted that the mission is both looking at the causes of the Capital Hill cash-gate and whether it is necessary to revise the budget in the wake of the aid freeze.
Malawi faced economic problems towards the end of Mutharika’s rule which were caused by suspension of donor aid which led to critical foreign exchange reserves and fuel shortages.
The current government instituted bold policy reforms which included the devaluation and floatation of the kwacha, and removal of subsidies on fuel.
The government also re-engaged with the IMF, resulting in the resumption of direct budget support by donors.
Experts have said that the reforms started yielding results, as evidenced by the easing of fuel shortages and improved access to foreign exchange by the business community.
