Only MPs, through fiscal legislation, can save our forex

Agnes Nyalonje is one of the most educated and exposed women in Malawi. She has Bachelor of Arts and Bachelor of Social Science degrees from Chancellor College, University of Malawi; a Master’s degree from University of Leeds and a post graduate diploma from the University of Edinburgh where she was once a lecturer.

Njalonje has consulted for the World Bank, the United Nations and the World Health Organisation. Before she became Minister of Education, she was a Member of Parliament for Mzimba North where she emerged as one of the most substantive legislators, well at least in terms of policy articulation, in Malawi.

To hear her blubber the gibberish that if one uses bank cards such as VISA debit cards in a foreign country means that he or she is not spending her country’s forex is the kind of rubbish that explains why legislators in Malawi contribute so little to the effective running of this country, particularly when it comes to fiscal policy.

It explains why the legislators in the country believe, for example, that ensuring foreign currency liquidity challenges in the domestic market is the preserve of the Reserve of Malawi (RBM) and Treasury—institutions they love to bash whenever there is a forex shortage as is the case today.

The Members of Parliament (MPs) froth on points of order that the parties in power are doing nothing to deal with the forex situation. But what have the legislators done?

At least you can see that the RBM has tried to do what it can with its limited tool box.  We have seen the central bank instituting, albeit short-term, measures to limit the damage of forex unavailability.

The bank has intervened in the foreign exchange market to support importation of strategic commodities; it has re-introduced the mandatory sale of 30 percent of export proceeds, it has tried to support misalignments of the exchange rate, effected a painful 25 percent devaluation of the kwacha to try and clear out imbalances; facilitated and guaranteed international lines of credit and pursued debt swaps, among other measures.

These measures have had limited success, if any. And that is not surprising because, as the RBM itself points out, the problem of forex shortages in Malawi “is largely structural, emanating from imbalances between the country’s limited capacity in generating foreign exchange against insatiable appetite for imports.”

In fact, to be bluntly clear, the country’s export earnings (which have been dwindling) are three times too little to balance out increased massive import bills that keep rising. Thus, this is more of a fiscal policy problem than a monetary policy challenge.

And that is where MPs, if they really understand their role in the economy, should come in. RBM, as a monetary authority, has almost exhausted its tools and all it can do now is to try the best it can to steady the local currency.

In other words, to address the current forex crisis we must look to fiscal policy, which is the most viable route for taming irresponsible foreign currency externalization occasioned by open doors to non-essential and undesirable imports that drain our dollar reserves while adding little value to the economy.

For too long, Parliament has allowed the Executive, by rubber stumping any budget tabled before it, to run away with expansionary fiscal policies. It is time the House exercised its real power over the fiscus by legislating against over generous fiscal policies amid paucity and appropriate contractionary spending and revenue plans in line with the country’s poor means. And that should include making austerity measures legally binding, for example.

The Tonse administration announced some half-hearted austerity measures such as restrictions of foreign travel that have largely been ignored; bans out of duty station meetings and workshops that few ministries, departments and agencies adhere to; cutting fuel allocations to ministers no one monitors and even restricting after-hours movement of government vehicles only to see several MG cars on the road at night.

The reasons these measures are being ignored is because they are mostly administrative with almost zero accountability for anyone who breaches them.

To make them effective, Parliament must now begin to pass such measures into law so that those who break it can automatically be prosecuted not just transferred to some rural area as punishment, if at all.

Thus, spending on what is agreed to be deemed non-essential should also be outlawed by Parliament and the same should apply to travel and the government fleet. In the same context of influencing government spending and revenue behaviour, MPs should also go after the Tax Code, outlawing certain imports that just drain forex without noticeable impact while inserting language that encourage certain exports.

I mean, why not, for example, triple excise duty on inferior and substandard imported products currently littering the whole country? Why not use the Tax Code on imported plastics that add no value, but have a huge dent on our forex and the environment? Why can’t our MPs legislate in favour of widening the export base by making it easier to diversify exports and establishment of structured markets for the various minerals and agricultural products our people exploit from our lands, only to be exploited by unscrupulous people? Our MPs must get more involved in fiscal policy legislation and oversight than the useless noise we hear from them.

And on the question of sustainable forex availability, they are our only hope.