Cut the Chaff

Some green shoots?

Of late, the Bingu wa Mutharika administration has started working on specific and concrete measures to deal with our twin problems: shortages of foreign currency and fuel.

What is even better is that authorities are actually communicating these measures to the public, thereby offering some clarity to markets.

This is important in the sense that it could help restore confidence in both the government and the economy, reduce panic and help normalise the situation as speculators pause to evaluate their risk appetites on the back of a once fluid environment starting to show signs of solidifying into stability.

I have in mind the confirmation by the Reserve Bank of Malawi (RBM) two weeks ago that government has secured the $200 million (about K33.4 billion at present exchange rates) that central bank governor Dr Perks Ligoya said late last year is needed to stabilise the economy.

Part of this money will be used to pay for fuel imports whereas some will go towards alleviating the country’s balance of payment (BoP) problems.

Already, we have seen that the fuel situation has improved markedly over the last week. Of course, the situation is far from normal, but given the gravity of the situation, we cannot expect every service station nationwide to immediately brim with fuel.

The fact is that the queues have largely disappeared across the country—at least for now.

I am still uncertain how long we can sustain this fuel availability.

But I am sure that more specific details on the fuel importation programme over the next six months—including information about how much we have paid so far and whether government still has the forex to pay suppliers—could go a long way in re-enforcing the confidence momentum going forward.

Government has a perfect platform from which to do this and regain control of the narrative when Finance and Development Planning Minister Dr Ken Lipenga tables the Mid-Year Budget Review Report before Parliament in a couple of weeks.

Lipenga must use this podium as a confidence-building and nation-calming platform not just on the fuel and forex front but also across major sectors and on key policy directions, including the durability of the zero-deficit budget framework, foreign relations and the IMF-supported programme currently off-track.

That said, Natural Resources, Energy and Environment Minister Goodall Gondwe, Ligoya and Lipenga deserve some pats on their backs for the efforts displayed so far to normalise the fuel and forex situation.

Granted, with most of the money currently funding the fuel imports being borrowed—mostly at commercial rather than concessional rates—government has chosen an expensive path to solving this problem. But authorities had no choice. Something had to be
done—and quickly.

But I am encouraged by the fact that these short-term emergency actions are being supported by other strategic moves aimed at bringing forex in a more sustainable fashion.

For example, the RBM-driven K25 billion Export Development Fund (EDF) aimed at increasing the export of non-traditional crops is a simple but practical and effective way of not just expanding the export base but also cutting our dependency on burley tobacco, a crop that has too many enemies on the global market.

These enemies include the anti-smoking lobby and the World Health Organisation Framework Convention on Tobacco Control (WHO-FCTC), which is set to implement its articles 9 and 10.

These articles aim to remove additives added to burley, which is considered to be bitter, to discourage young smokers. The argument is that the addition of additives encourages more people to smoke.

Implementation of the articles 9 and 10 will have a devastating impact because it means reducing the growing of burley, which is mostly the preserve of small-scale farmers.

The other strategic initiative is the National Consultations on Export Diversification and Foreign Exchange which the RBM rolled out and now the Ministry of Finance and Development Planning is pushing ahead with as it should.

It is important that the targeted stakeholders take these consultations seriously through active participation.

It does not help anyone to gripe about forex shortages without offering solutions, especially when government has provided a platform.

On the other hand, authorities should not use these consultative forums as window dressing sessions whose output will just rot in some drawers at Capital Hill. The folks being invited are busy people and will sacrifice their productive time for the good of the country. That sacrifice should not be in vain. The stakes are too high.

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