Foreign aid flew away. Its wings powered by governance vices.
Corruption, public office abuses, weak public finance management are some of the main degeneracies that blew away donor goodwill.
With Malawi unable to generate enough foreign currency to cover its import bills, direct budgetary support was crucial to supporting the country’s balance of payments. But it evaporated.
Presently, according to Reserve Bank of Malawi (RBM) figures, Malawi exports just about $1 billion (about K1.1 trillion) in goods and services per month against roughly $3 billion (K3.3 trillion). Malawi has clearly failed to generate and keep enough hard currency to meet its import bills.
Yet it has surplus agricultural products that other countries with products crucial to Malawi such as fuel and fertiliser need and can be exchanged without money in foreign currency changing hands, which is the hard currency Malawi does not have.
But will the idea of barter trade, butter up Malawi’s battered economy?
Some academics say if well managed, the barter arrangement can be good for Malawi despite some commentators remaining skeptical.
Malawi University of Business and Applied Sciences economics lecturer Betchani Tchereni said, if cautiously managed, the barter arrangement could help stabilise the economy.
He said: “Government will not have to look for foreign exchange to buy some of the strategic commodities. This will also help to export some of our commodities without having to look for the market.
“However, with undervaluation of commodities and overvaluation of the imported commodities which is bound to happen, this may also imply that as a country, we may face difficulties to have foreign currency to be used for other commodities.”
Lilongwe University of Agriculture and Natural Resources (Luanar) agricultural economist Horace Phiri said going by the situation in the country policies that work for the good of Malawians are welcome.
He, however, cautioned that the process should take on board technocrats to avoid a situation where the country loses out from the agreements.
“With the mess that was there from a similar deal last year where the government reportedly lost money, one would hope that proper due diligence is done to avoid a similar situation and instead ensure that we all benefit from this agreement,” said Phiri.
National Planning Commission public relations and communications manager Thom Khanje said given the forex challenges, barter trading generally is a welcome development if there are willing trading partners in any sector of the economy.
“However, with regard to the viability and terms relating to its application in the current fertiliser procurement under AIP [Affordable Inputs Programme], the ministries of Agriculture or Finance are best-placed to respond,” he said.
The government , through the Ministry of Agriculture, has offered East Bridge Estate a deal to supply 600 000 metric tonnes (MT) of fertiliser worth $124.5 million (about K128 billion).
The Romanian company is expected to supply 300 000 MT of Urea and 300 000 MT of NPK under a commodity exchange/ barter agreement in a contract to run until July 24 2024.
The ministry and the company signed a Sale and Purchase Agreement on December 14 2022 and then a Commodity Exchange Agreement on March 23 2023 before issuing an addendum on May 18 2023.
In the Romanian firm’s deal, government will pay through the supply of farm commodities which include 250 000 MT of soya beans, 250 000 MT of groundnuts, 200 000 MT each of pigeon peas and maize, 50 000 MT each of rice and sorghum and 25 000 MT each of cotton and sugar.
On Thursday last week, President Lazarus Chakwera also held talks with Egyptian President Abdel Fattah el-Sisi on the possibility of exploring barter trade between Malawi and Egypt.
The two engaged in bilateral talks on the sidelines of the Common Market for Eastern and Southern Africa (Comesa) Heads of State Summit in Lusaka, Zambia where Chakwera indicated that the country is carmaking products such as tobacco and fertiliser for barter trade.
In Malawi, drugs, fuel and fertiliser are some imports that drain a lot of forex.
Last growing season, for instance, Malawi spent K109 billion on the AIP where a large chunk goes to fertiliser imports.
Total foreign exchange reserves dropped to $592.1 million or 2.4 months of import cover as at end March from $646 million, an equivalent of 2.6 months of import cover in February, according to RBM’s March Economic Review Report.
