People still suffer devaluation effect

Over a month after the Reserve Bank of Malawi (RBM) devalued the kwacha against the dollar by 44 percent. Our correspondent AYAMBA KANDODO engaged governance expert Boniface Chibwana, who is also the Catholic Commission for Justice and Peace (CCJP) national coordinator, to comment on the devaluation, cushioning measures and other issues.Excerpts:

 Q: What is your take on the RBM decision to devalue the kwacha by 44 percent?

A: The choice to devalue the kwacha underscores more profound economic challenges stemming from a sequence of sub-optimal decisions and governance shortcomings. It reflects a pattern of less-than-ideal economic management. Had more prudent choices been made earlier, Malawi might not have found itself in the position necessitating such a substantial devaluation of its currency. It is for this reason we should insist on good governance that has the zeal to grow this economy.

Q: What is your take on cushioning measures government announced after the devaluation?

A: The austerity measures are an initial positive step, but they fall short of addressing the substantial issue of government wastefulness. A more comprehensive solution requires a thorough overhaul of the entire government machinery. The Public Sector Reform Report was anticipated as a vehicle for such transformative changes. However, it is disheartening that the report has not been made public to prompt the necessary implementation and accountability. The urgency lies in enforcing the reforms outlined in the report to curb inefficiencies and promote responsible spending. Advocating for the swift implementation of the Public Sector Reforms Report is essential in pushing for the systemic reforms needed to enhance efficiency and reduce wasteful practices within the government.

Q: Some quarters say 44 percent is way too much. It would have been better if this wasimplemented in phases. Do you share the same views?

A: Certainly, the recent devaluation has had adverse effects on many Malawians, particularly those already grappling with economic challenges like the poor. Regardless of whether the devaluation is gradual or abrupt, any margin of  devaluation is excessive, especially in the context of a well-managed and sound economy. Ideally, in a stable economic environment, devaluation wouldn’t be a necessary recourse. The impact on the vulnerable segments of society underscores the need for careful economic management and policies that aim to protect the most economically fragile. Addressing the root causes of economic instability becomes imperative to create an environment where devaluation is not seen as a recurrent measure, but an exception in the face of extraordinary circumstances.

Q: Do you think the devaluation will solve matters?

A: Devaluation alone doesn’t constitute a comprehensive solution. It is just one aspect that needs careful consideration. While kwacha will act as a corrective measure in response to economic challenges, its success relies on a broader, holistic approach that addresses the underlying root causes. In our case, poor economic governance is the most prominent root cause.

Q: Government suspended the President’s foreign trips, including those of ministers and senior government officials as part of controlling expenditures. What is your take on this?

A: We find it challenging to determine whether this is a genuine shift or just a superficial gesture. This uncertainty underscores the importance of government taking a proactive stance in providing evidence. It is crucial for the government to demonstrate the authenticity of the change by providing tangible proof of its implementation. We insist on this proactive approach to ensure transparency and accountability. By presenting evidence of the actual impact, government can instil confidence and dispel any perception that the change is merely cosmetic. We need proper monitoring mechanisms if indeed those measures are adhered to and we need to update every month on what we have managed to serve as a result of austerity measures.

Q: With all these measures, do you think it will solve things up to the level where a poor Malawian can smile?

A: Absolutely not, unless the root causes are effectively addressed. Maintaining excessively high expectations might be unwarranted.

Q: What should government do to make things work, given the present situation?

A: Our recommendation is for the government to prioritise achieving macro-economic stability and exercising prudent spending practices. It should also do an overhaul evaluation of the government to enhance prudent spending. We also need to spend within our means because the high debt levels are chocking this country. We cannot continue like this when our budget has high deficit. We also need to walk the talk on mega farms for we need to produce more for export. We also need to create conducive environment on the market for farmers to have easy access and bargaining power when selling their produce