Which way APM’s economic direction?

Honourable Folks, now that elections are over, winners have been sworn in, APM has appointed his 20-member Cabinet and married, we can now focus on “the economy, stupid”.

How does government grow the economy by 7.5 percent?

This isn’t just a DPP campaign pledge for which the APM administration shall be held to account. It is a must that the economy should significantly grow. Development study gurus say economic growth of less than 6 percent isn’t good enough for our poverty reduction agenda.

As a people, we have the right to aspire for improved living standards and the pursuit of happiness in the only country God gave us to call home—Malawi. The starting point for all this is good governance, respect for human rights and the pursuit of good economic policies conducive to the generation of wealth.

A cursory look at the entire 20 years of multiparty government shows that it’s only in the first term of Bingu wa Mutharika’s tenure (2004-09) that the economy grew by 7 percent and above consistently for a number of years.

It’s a feat even Bingu himself failed to replicate in his second term of office. In 2011 the economy grew by 3.8 percent and the downward spiral continued to 1.8 percent in 2012, the year Bingu died of cardiac arrest on April 5.

If the truth be told, economic performance in Bingu’s second term was much worse than that of his successor, Joyce Banda, who has nevertheless been booted out of office this year after serving for only two years.

In her first year, JB grew the economy to 4.4 percent and despite the Cashgate scandal and the budgetary support freeze, the economy was so buoyant that it’s projected to further grow this year.

So which way Malawi economy? The question becomes pertinent in the wake of the ambivalence in rhetoric from the APM camp. From the DPP manifesto to the inauguration speech and, most recently, the maiden address to the National Assembly, APM promised a 7.5 percent economic growth rate. The fog needs to clear on the how.

In his address to the National Assembly, APM indicated his government would deal with both western donors and the new kids in town famously known by the acronym, Brics (Brazil, Russia, India, China and South Africa). No problem with that.

Then came Minister of Finance and Economic Planning Goodall Gondwe. He first told the media the country would go ahead with its budget, donors or no donors, again no problem with that, you’d say.

Then another day the same Gondwe was quoted as having said donors should come in to support government programmes and not impose on us their own agenda. Nothing wrong with that as well except for the sense of déjà vu it invokes which might attract a wait-and-see attitude on some donors.

The last time we heard that argument was when Bingu was telling bilateral donors off for criticising his leadership style and multilateral donors off for opposing his decision to politically regulate the value of the kwacha and the money market. Indeed off they went and Malawi was reduced to a chigubu economy.

I submit that JB managed to start reversing our economic woes by introducing economic reforms which were attractive to the donors.

I also submit that the economic success of Bingu’s first term happened with the help of donors who, apart from pouring in a lot of aid, also converted Malawi’s 2.97 billion USD foreign debt into a grant between September and October 2006.

APM assumes office when public debt (foreign and domestic) stands almost at 1:1 with the 2013/14 national budget. By end of 2013 foreign debt had already soared to 1.2 billion USD!

To service these debts, set aside over 10 percent of the budget for Fisp (which APM administration is adamant to continue), make another budgetary allocation for iron sheets and cement subsidy (as they have also promised), then meet government’s standing recurrent and developmental needs will definitely require significant amount of donor aid.

If not, then the economy can only register 7.5 percent economic growth with divine intervention.