RBM income jumps 5% in Q1

The Reserve Bank of Malawi (RBM) says its income in the first quarter (Q1) of 2013 grew by K12.9 billion or 5.1 percent to K266.6 billion from K253.5 billion in the prior quarter.

The central bank, in its financial and economic review for Q1 of 2013, said the increase was propelled by a jump in foreign sector liabilities of K16.3 billion, accounting for 42.1 percent of the total resource envelope.

RBM has attributed foreign sector liabilities increase to revaluation of gains of International Monetary Fund (IMF) liabilities amid continued depreciation of the kwacha.

Monetary authorities devalued the local unit by 49 percent in May 2012 and subsequently adopted a market-determined exchange rate regime.

Since then, the kwacha was on a free-fall and only started appreciating in early April this year.

The RBM said official sector deposits also increased by K13.7 billion, accounting for 15.7 percent, reflecting largely receipt of donor financing for various projects in the country.

However, deposits of the commercial banks plus till money declined by K8 billion, whereas notes and coins in circulation and unsectored liabilities recorded quarterly decreases of K5.2 billion and K3.8 billion, respectively.

Just like the commercial banks, RBM used the bulk of the accumulated funds to support the domestic sector. In particular, lending to the central government increased by K19.6 billion.

“This outturn was attributed to uptake of K22.2 billion Ways and Means advances which was partly offset by maturity of K1.8 billion Treasury bills (T-bills) and outright sale of K801.8 million Treasury notes.

“Lending to commercial banks through discount window accommodations rose by K10.2 billion, whereas investments in the foreign sector grew by K249.5 million. Other assets of the central bank declined by K17.1 billion during the first quarter of 2013 due to some RBM operations,” reads the review which has analysed the operations of various sectors of the economy.

On commercial bank, the RBM review said in the first quarter of 2013, commercial banks’ resources grew by K23.9 billion to K502.1 billion from K478.2 billion recorded in the preceding quarter.

The capital accounts contributed K9.8 billion to the accumulated resources, reflecting profitability of investments undertaken by the commercial banks during the review period.

The review indicates that deposits of the official sector accounted for K8.4 billion and this was largely attributed to improved administration in revenue collections by the state-owned enterprises.

Commercial banks’ unsectored liabilities, in the period under review, increased by K8.3 billion due to discount window borrowings, whereas private sector deposits grew by K5.5 billion due to aggressive deposit mobilisation by the commercial banks.

But liabilities to non-residents dropped by K8.2 billion between December 2012 and March 2013.

Regarding usage of the funds, the review said domestic credit constituted the main channel of commercial banks’ investments as it grew by K14.5 billion during the first quarter of 2013.

Of the total credit, K10.2 billion was lent to the private sector whereas K4.7 billion was extended to the central government through uptake of T-bills which was partly offset by a K366.9 million repayment by the state-owned enterprises.

“Unsectored assets of the commercial banks rose by K12.8 billion due to increased interbank lending and investment in other assets,” says the review.

On the contrary, commercial banks’ deposits at the central bank decreased by K3.3 billion due to foreign exchange purchases by Authorised Dealer Banks (ADBs), whereas claims on non-residents dropped by K128.3 million during the period under review.

Maize prices start rising

INNOCENT HELEMA

Maize prices have started rising with official data from the Ministry of Agriculture and Food Security indicating that the staple crop’s price rose 1.4 percent from K85.23 per kilogramme (kg) in May to K86.43 per kg in June.

Experts have, so far, argued speculation is responsible for the jump in price, coming at a time most households are eating from their harvest.

The price of the staple crop prior to June generally declined with maize pegged at K135.11 per kg in March and dropped to K105.79 in April before dropping again to K85.23 per kg in May.

The decline in the price of maize consequently pushed down inflation, currently at 27.9 percent.

However, the price of the staple crop has started to rise apparently due to speculation and political statements.

President Joyce Banda, in her recent political rallies, has been saying that maize prices will be higher this year than last year and Malawians must brace for tougher times.

Last year at the peak of food shortages, a 50 kg bag of maize peaked at as high as K10 000.

But Civil Society Agriculture Network (Cisanet) national coordinator, Tamani Nkhono-Mvula in an interview on Tuesday attributed the rise in maize prices to demand outstripping supply.

“Traders are speculating on maize prices due an apparent food shortage and some traders are actually hoarding their produce. This has resulted in demand being more than supply.

“We should expect a sharp rise in the prices during the lean periods. Government must provide more resources to Admarc [Agriculture Development and Marketing Corporation] and the National Food Reserve Agency [NFRA] to be able to buy enough maize because maize prices are currently competitive on the market,” he said.

Latest findings of the Malawi Vulnerability Assessment Committee (Mvac) report said about 60 000 metric tonnes of maize worth about K7.2 billion is required for relief in the country.

The report notes that a total of 1.5 million people, which is approximately 10 percent of the total population, will face food shortages.

But Mvac adds that the figures may change depending on food situation on the ground.

Mvac projects that maize prices will average K125 per kg (K6 250 for 50 kg bag) during the consumption period and pickup to a maximum of K200 per kg (K10 000 for 50 kg bag) between the peak lean periods of December 2013 and January 2014.

The May 2013 Famine Early Warning System Network (Fewnet) report further notes that the Central and Northern regions will experience food shortages between July and September this year.

Fewsnet noted that the food security situation will likely begin to deteriorate in the July to September period, as some poor households that experienced low crop yields due to dry spells begin to deplete their stocks and run out of cash from crop sales.

Poor households will be stressed in Mangochi, Dedza and Salima, Kasungu, and Lilongwe Plains. Dowa, Ntchisi, Mchinji and Kasungu and Mzimba will also be stressed.

Govt Track

Nice to focus on qualities of leadership in 2014

Malawi News Agency

The National Initiative for Civic Education (Nice) will from January to May 2014 focus its sensitisation campaigns on the quality of good leadership as the country goes towards the tripartite elections.

Currently, Nice is disseminating various messages ranging from why people should register and the requirements needed for the registration.

Speaking on Saturday in Blantyre during the launch of mobilisation and awareness campaign for the next year’s elections, Nice executive director Ollen Mwalubunju said the launch of the campaign is part of the organisation’s objectives in trying to enforce the activities that are already in place.

He said choosing a good leader is the key in every election and that come January next year, the sensitisation campaigns will dwell much on how people can identify a good leader during the polls.

“Good leadership is very important for every person to look for before choosing any representative during the general election. In this case, our sensitisation will reach at its climax in January mainly on qualities of good leadership,” said Mwalubunju.

He said Nice will use various means of disseminating information to the public and that so far it has intensified its sensitisation campaigns in five districts where registration has started.

“The organisation will use various artists, dramas, poets which will play in market places to communicate to many people.

“Above all, we have also communicated to faith based organisations that they should relay the messages on the registration exercise in their respective places,” said Mwalubunju.

He said the sensitisation campaign is targeting the marginalised groups and that the organisation has developed messages that are friendly to the blind as well as the deaf.

“In this case, let me inform the public that Nice has procured embosser machine which will change the messages into braile to communicate well with the visually impaired people,” he said.

Malawi Electoral Commission chief elections officer Willy Kalonga said the launch marks a milestone in as far as the 2014 Tripartite Elections are concerned.

NGO asks govt to include caregivers on its payroll

Christopher Jimu

The Association of Early Childhood Development in Malawi (Aecdm) has asked government to include care givers of early childhood development on its payroll to motivate them.

Aecdm executive director Charles Gwengwe made the request last week during the closing ceremony of a six-month comprehensive early childhood development training conducted for caregivers of Chitipa at Baka Agricultural Training Centre in Karonga.

He said children who have gone through early childhood development services are bound to do better academically in succeeding levels.

Gwengwe, however, observed that early childhood services may not be sustainable if the country continues to rely on caregivers who work on voluntary basis.

‘‘Studies reveal that you cannot build an important programme on volunteerism, hence, it is not sustainable to rely on caregivers who are on voluntary basis considering factors such as hard economic challenges that they face.

‘‘We have been advocating with the Ministry of Gender, Children and Social Welfare to consider giving the caregivers necessary incentives and we hope that they will start helping them soon,’’ he said, asking government if it could consider including care givers on a payroll.

He said that currently, out of over four million young children in Malawi, only a million are able to access early childhood services due to lack of committed caregivers.

NAC targets women in VMMC

Christopher Jimu

The National Aids Commission has targeted women in its Voluntary Medical Male Circumcision (VMMC) campaign as one way of preventing the spread of the HIV and Aids pandemic.

Speaking at a VMMC communication strategy meeting in Blantyre last week, NAC’s information officer Elliam Kamanga said they have involved women in their strategy because of the role they play in men’s lives as spouses and partners.

He said women hold a vital place in influencing men’s decisions.

“Women are vulnerable to being exposed to HIV and Aids contraction from their male partners, hence, the need for their involvement in VMMC which is important since it reduces a man’s risk to HIV acquisition. This is a good pragmatic reason to make women support VMMC since its health benefits concern them too,” he said.

The strategy, which takes women as its secondary audience, has showed that currently women do not advocate for their male partners to undergo VMMC since it is perceived as a male-related issue.

“Many women do not know much about VMMC so it is hard for them to know its direct benefits to men and indirect benefits to them. This is attributed to religion and cultural reservations the women have about VMMC,” reads the strategy document in part.

But Kamanga said the strategy plans to teach women to support their partners with information on the facts and benefits of VMMC.

“VMMC has a minimum package of benefits which include male circumcision, HTC [HIV testing and counseling], STI [Sexually transmitted infections] screening and post operative care.

“So we are going to inform women about all this so that they would help us reach to their partners by highlighting the benefits to them which will result in more men accepting to undergo VMMC,” he said. n

Icraf launches conservation agriculture in Dedza

The International Centre for Research in Agro-forestry (Icraf) last week launched a project on conservation agriculture in Tambalika Village under Chafumbwa Extension Planning Area (EPA) in Dedza.

Assistant training officer for Icraf Catherine Lowe Chavuta told Malawi News Agency that they are encouraging famers to plant maize together with trees that help to enrich soil fertility such as katupe, greecedia and pigeon peas so that they would use little or no fertiliser.

She said conservation agriculture also saves farmers time as it requires less tending of the garden.

“Conservation agriculture is good because a farmer does not waste time to prepare the garden for planting and as time goes, it also reduces the number of weeds in the field, as such, a farmer does not have to weed the garden and instead use that time for other activities,” said Chavuta

She expressed the hope that that every family would have two or more fruit trees around their homes by the end of the project.

Chavuta said the project is being implemented in three districts of Mzimba, Thyolo and Dedza.

Assistant district agriculture development officer Mariko Cheyo noted that conservation agriculture was the best option in the face of climate change and, therefore, thanked Icraf for bringing the project to Dedza, saying it would help more farmers achieve food security.

FEATURE

Introducing Paul Phwiyo: New Budget director

EPHRAIM MUNTHALI

At only 37, Ivy League educated Paul Mphwiyo is the new Budget Director, a cross-cutting job that puts him not only at the nexus of the fiscus, but also gives him the responsibility of providing direction to the Malawi economy. He is not there by mistake. He has held a number of key positions within the Ministry of Finance, including deputy budget director, acting director of economic affairs and acting director of financial sector development. Enjoying both of two worlds—being an expert at fiscal as well as monetary policy—Mphwiyo brings unique core skills to the job that is as critical to the country’s economic growth as it is controversial. I interviewed him at his Capital Hill office in Lilongwe.

Congratulations on your new appointment as budget director. How do you feel?

Thank you very much Ephraim. Of course, when elevation comes your way-in this case as director of the national budget—the first feeling for any human being is that of happiness and self-fulfillment. I am no exception to that human norm. But beyond that, I feel extremely humbled and privileged to have been entrusted with such an enormous responsibility of directing the fiscus. It is a privilege because there are so many other capable Malawians out there and others that could actually be more capable than myself. I guess it is what some people call luck. Others call it destiny. In whatever variant, that’s what I call Divine Providence and to me it is a call to national duty to serve the government and the people of this Great Nation. I am thankful to Her Excellency the President, Dr. Joyce Banda for her trust in me to take up such a challenging responsibility. And as a believer, I am more thankful to the Greatest Invisible, the Almighty God Himself, without whose wish this would never have been possible.

This is one of the most challenging jobs at Capital Hill. What competences—in terms of academic grounding, experience and personal attributes—do you possess that shows you have what it takes to be at the nerve centre of the country’s fiscus?

Ephraim, this is indeed one of the most challenging jobs in Capital Hill. One of my former Ministers, Goodall Gondwe, once told me that “if you are a senior Treasury official and people think that you are a very nice person, you must be doing something wrong.” This should not be taken literally, but should convey the difficulty of this job and you know what I am talking about because we have worked together at this Ministry before.

Ephraim, I am mindful of the fact that it is almost impossible in this country to explain your competencies without sounding cocky. Just like many others in this Ministry and out there, I believe I have what it takes to take on this challenge.

My academic grounding started at Pius XII Seminary where I did my secondary school until 1992. I wanted to become a Priest at first so I went to Kachebere Major Seminary in Mchinji but I left after a brief stint out of my own volition and proceeded to Chancellor College where I pursued my Bachelor’s Degree in Social Science majoring in Economics with Political Science as a minor. Upon completion, I was awarded a meritorious scholarship by the Undp for MA studies in economics under the Collaborative Masters Programme for Anglophone Africa (CMAP) where I did my elective courses in Nairobi, Kenya, at the Joint Facility for Electives (JFE). I was 23 years old at that time. I have been a blessed person in life and I pursued other advanced degrees in finance and economic policy management at Columbia University in New York. To cut it short, I am a Columbia trained finance expert and economist with several advanced degrees and I am currently studying towards my PhD in economics where my research interests focus on financial development and the economic growth nexus within the framework of regional economic integration in Sadc. And as you well know, I have authored extensively on fiscal and monetary policy topics both internationally and locally, including being a guest columnist in your paper.

Ephraim, doing my studies at Columbia University has accorded me the privilege of being taught by some of the sharpest minds in Finance and Economics that the world knows. I have in mind my Professors Robert Mundell, Joseph Stiglitz, both of whom are Nobel Laureates. I have also had the privilege of being trained by Professors Guillermo Calvo, the indisputable Father of Emerging Market Economics, Carmen Reinhart, Jeffrey Sachs, and Charles Colomiris, the Kaufman Professor of Finance at Columbia University’s Business School. The least goes on.

Apart from these, I have also received specialized training in a number of areas including Budget Management and Public Financial Accountability; Performance Based Budgeting; Financial programming and Policies; Macroeconomic Diagnostics; Financial Sector Assessment including Stress testing of the sector; Financial sector policy and reform; Project Planning, management, implementation, monitoring and evaluation; Design of Deposit Insurance Schemes and their Investment Management; Risk Assessment for Anti-Money Laundering and Combating the Financing of Terrorism; Financial and Economic Analysis of Development Projects; and Cost Benefit Analysis. These were under the auspices of the African Capacity Building Foundation (ACBF), IMF East Afritac, World Bank, European Union, Financial Action Task Force (FATF), the European Union, and the International Association of Deposit Insurers (IADI), among others. If that is not a compelling package, I have no idea then what would constitute one.

Briefly tell me about your civil service career path, especially at Treasury where you have spent most of your professional life?

My career in the civil service has been a blessed and steady path so far. I have built teams and units. I have sat in management positions that carried accountability and responsibility for poor decision-making. I have helped formulate national budgets and taken part in implementing them successfully; conjured and negotiated country economic programmes that have achieved desired objectives, and developed policies and strategies in various fields that have borne fruit. I can go on and on, but I am sure you, Ephraim, know my capabilities especially having worked together at the Treasury where I joined, almost a decade ago, as Assistant Budget Director then rose to the position of Deputy Budget Director, Acting Director of Economic Affairs, Acting Director of Financial Sector Development, and now I am Budget Director.

Before joining the Treasury, I worked at the Department of Energy Affairs as Economist and Senior Economist and then Ministry of Lands as Principle Economist. In total, I have slightly over 15 years of experience in the civil service.

As you know, Ephraim, the budget as we know it in Malawi, is just the expenditure side of the fiscus and my work in Economic Affairs involved fiscal policy in its entirety, including inflows (both domestic and foreign), expenditures, and financing and the interplay between the fiscal sector and all other sectors such as the real, external, and monetary sectors. That experience of having been in budgeting before, moving to broader fiscal policy and going back to the budget division makes me a well-rounded person with a much broader picture of what the budget is supposed to achieve. It is not a privilege that most people have had before. Working in line ministries before also helps me appreciate implementation and other challenges in budget implementation.

Through my civil service career, I have met professionals that greatly helped in shaping the person that you know today. I have in mind the current PS for Foreign Affairs, George Mkondiwa whom I worked with when I was at the Department of Energy and Ministry of Lands. The late Dr. Charles Kafumba is another notable contributor to my growth in professionalism. I have also served under three different Finance Ministers beginning with Hon Goodall Gondwe, Hon Ken Kandodo, and Hon. Dr. Ken Lipenga and I have enormous respect for all of them. You are free to ask them about by competence in my new position. Mr. Randson Mwadiwa has been Treasury Secretary twice and has also contributed to my development. He too could tell you what I am capable of or not.

In addition, my career has been a unique blend of national and international public financial management and financial sector experience as a policy maker, policy implementer, public financial management and financial sector practitioner. With combined experience in national budget planning, implementation and monitoring; public financial management; financial and economic policy and management; and financial sector development, obtained both locally as a civil servant and internationally during my work at the World Bank at the Financial and Private Sector Development Vice Presidency where I was a consultant for one year to the Financial Markets Integrity Unit in Washington DC, I can make an affirmative claim that I have the capabilities that will help me fulfill the duties germane to my recent appointment.

As a policy maker and implementer with robust international experience, I know how difficult it often is for policy makers to create a level playing field and how easily government policies can create winners and losers unintentionally. All in all, I can summarise my competencies in the Latin phrase “Res Ipsa Loquita” meaning things speak for themselves.

Out of the celebrated economists globally, which ones shape your world view and policy approach? How would such a world view help you in carrying out your new

duties?

Ephraim, forgive me if I am seen to be biased towards those that have shaped my academic life and thinking. I am greatly influenced by my Professor in Global Economic Policy, Robert Mundell, because of his work on the Theory of Currency Areas. As you may know, we refer to him as the Father of the European Union because of his influence over the creation of the Euro zone as a one currency area. When you read the history of the international financial system in relation to crisis episodes, you will have the sense that his advocacy for larger currency areas is beneficial to smaller countries as it tries to break “the exorbitant privilege” of seignorage that has been the traditional domain of Super Powers. This is directly relevant to the current buzz of regional economic integration and very few people, including economists, know that he has greatly influenced this. That knowledge is important in any regional economic integration agenda that we may be pursuing as a country, be it under Sadc, Comesa or the AU. In addition, any undergraduate in economics will tell you about the Mundell-Fleming Model and I do not know of any authority better than him on Balance of Payments (BOP) dynamics under various exchange rate systems.

Guillermo Calvo, my Professor in Macroeconomics is another celebrated economist who has influenced me through his work on financial crises in Emerging Market Economies (EMEs), the most notable ones being his master pieces on how EMEs and smaller economies such as Malawi are prone to “sudden stops” of capital flows and exhibit a behaviour known as “Fear of Floating.” His catalogue of crisis episodes in Latin America and other EMEs contains robust evidence relevant to a country like Malawi in calibrating monetary and fiscal policies that can help attenuate the effects of large currency adjustments that may at times be contractionary.

And of course, we are all today influenced by Milton Friedman, whom I never had a chance to meet but has immensely contributed to the neo-classical economics that has dominated modern literature, especially the conduct of monetary policy through the famous Quantity Theory. Surprisingly, much as he is well known through this theory, I have been more influenced by his contributions towards the theory of consumption, which in directing a government budget, is important in helping to define your hard budget constraints and the interplay with other sectors of the economy. For a country like Malawi where government remains the largest procurer of goods and services, it is essential to have the hindsight of fiscal implications on growth, especially as it relates to the sustainability of the current account, a measure of the country’s indebtedness to the rest of the world. Such issues are important for a healthy Balance of Payments (BOP) position; have a bearing on prices; and the rebuilding of international reserves, all of which are important in our economic recovery efforts. There are many more, Ephraim, but these will suffice for the time being.

Despite the circus of pre-budget consultations that have been done over the past few years, some people say the budget planning and formulation process is not consultative enough. What is your position?

Ephraim, I think that over the years, the Ministry of Finance has tried to be as consultative as possible in coming up with the national budget, of course, in line with national priorities as encapsulated in the Malawi Growth and Development Strategy II (MGDS II) and more importantly now, the Economic Recovery Programme (ERP). One thing for certain is that we are not in Ancient Greece where the entire population can be consulted. That said, I know there is still room for improvement in our consultative process to include more stakeholders. But I hope we will not confuse the notion of consultation with having everything that the consulted say included in the budget.

What, in your view, are the major challenges that affect the efficiency and effectiveness of the Budget Division?

In simple terms, the mandate of the Budget Division is to efficiently and effectively manage the national budget. It entails allocation of resources in line with national development priorities and policies. Major challenges that affect the operations of the Division include failure to unlock budgeted resources from the Development Partners and low absorption on donor funded projects by the sectors amidst a situation where financial resources are scarce. This creates unnecessary pressure on the budget. We need to get more proactive and ensure that absorption is at optimum levels. We will have to provide more technical support to big spending ministries to ensure that absorption is not only optimal but also that spending is on eligible items.

Management of the wage bill has also eluded us for some time. We need to get to the bottom of large monthly fluctuations and ensure that we understand the source of wage bill volatility. Ultimately, we need robust wage bill management systems that link with IFMIS. Through the Accountant General’s Department, we also need to improve on remittance of salaries to ensure that our employees are paid on time. While we will continue to put emphasis on paying all employees through the formal banking system, we will also explore innovative ways of remitting funds including the use of mobile technologies and agency banking, among others.

What changes can you recommend within the Budget Division to improve its efficiency and effectiveness?

Considering that budget implementation is dynamic as it responds to emerging issues, there is need to improve on cashflow forecasting to ensure more predictability on funding levels. This would in turn improve execution of activities on the part of implementing institutions.

There are also concerns that Malawi’s Public Finance and Economic Management (PFEM)—in which budgeting is a core area—has weakened so much that 30 percent of the national budget goes to waste every year. What is the problem?

Ephraim, financial resource allocation is an exercise that often takes into account priorities. Wastage of resources may take place in the course of implementation of the budget in respective ministries. It is, therefore, up to the Controlling Officers to ensure that resources are committed and spent on activities and priorities on which the budget was premised. Disparities between the planned and actual outputs can be attributed to a number of factors such as capacity constraints.

It is important to note that Public Finance and Economic Management (PFEM) covers a whole range of components from budgeting, procurement, accounting and auditing. It has to be appreciated that a problem in any of the components outlined results in wastage of resources as they would have been applied on unintended activities. If I were to single out the elephant in the room, I would not hesitate to point a finger at procurement or misprocurement as one of the main causes of resource wastage. Addressing this issue will require a concerted effort and from a finance perspective, we have already started improving the business processes in IFMIS and we will take decisive action going forward on any misprocurement.