IN THE NAME OF SAVING MALAWI...
By Joseph Kayira | 20 November 2023
Where I live, we are still arguing; and bone of contention is the 44 percent devaluation of the Malawi Kwacha, which the Reserve Bank of Malawi announced some days ago. We were informed that the devaluation was a necessary evil that once effected it would unlock donor funds that this country very much needs for development projects and to resuscitate the economy, which has been in the doldrums for far too long. The exchange rate was adjusted from the selling rate of K1,180.29 to K1,700.00 United States Dollars with effect from 9 November 2023.
The Central bank said the adjustment stemmed from an assessment it conducted which showed that: Supply demand imbalances remain in the market despite adjustments of the exchange rate through the auction system; arbitrage opportunities have resurfaced in the market due to the mismatch in the exchange rates in the cash and TT markets; and that spot checks on some of the players indicate that the market is able to clear import bills at this rate.
Immediately the adjustment was announced businesses reacted. Pump prices of fuel went up; that ignited uncertainty in the market. Overnight almost everything had a new price tag. You would not blame the businesses. They are in business to make profits – profits that are just. But in the confusion, some businesses are charging exorbitantly for their goods and services.
This is causing a lot of misery on the people; most cannot afford three meals a day. With 4.4 million people facing hunger, the devaluation seems to have added salt to the injury. Malawians have been hit below the belt as they are struggling to come to terms with crime, shortage of food and other basic goods.
Opinions range on why this devaluation is necessary or why it should have been delayed or why it should have been rejected all together. Those who back it say it was long overdue and its delay is the reason the economy is not ticking.
Minister of finance Simplex Chithyola Banda says “the situation with the exchange rate has long been like that of a tree with an infected and rotting trunk for which there are only two options: Either we cut the trunk so that it can grow healthily again, even though doing so will result in the temporary loss of the shade that protects us from the sun’s heat, or we continue to enjoy the shade until the cancer of the tree spreads to the roots and kills the whole tree permanently.”
“By finally correcting the exchange rate, the Reserve Bank of Malawi has chosen to give us a healthy tree that will grow again and give us better shade in the future, rather than a dying tree that gives us shade today but that will not bear any fruit going forward. In fact, the Reserve Bank of Malawi should have done this a long time ago so that we would not have lost so much time and so many opportunities under the shade of a false exchange rate. Additionally, if this had been done early enough, we would have had a smaller adjustment in the exchange rate, but now we are having to deal with such a big adjustment because the correction was left too late,” he says.
In the same vein, Malawi has secured the International Monetary Fund (IMF) a four-year Extended Credit Facility of K296 billion. The package is expected to stabilize the economy which is on its knees. There is high expectation that donors would resume budget support. The facility will help to boost Malawi’s economic growth. The IMF acts as a catalyst to unlock funds that will be channelled towards different sectors of the economy.
There are sacrifices to be made. The devaluation is a bitter pill. Poor Malawians are especially paying the high price of this adjustment. They need protection from government against traders and service providers who are engaging in unfair pricing of commodities and services.
Farmers are also struggling to buy fertilisers and seed at new prices. The fear is that should they fail to produce enough this growing season, the result would be serious food shortages next year.
Whatever good things that come with devaluation, it will be very difficult to convince Malawians that it is indeed a necessary evil. Late Bingu wa Mutharika refused to devalue the Kwacha when he was told to do so by multilateral institutions. He became very unpopular with the IMF and the West. Yet, Bingu managed to grow the economy; he turned things around. Under Bingu, Malawi became a breadbasket, exporting maize to other countries in the region.
This time round, cost of living is too high. All Malawians are fed is political rhetoric. Both the ruling party and the opposition parties are busy trying to outclass each other on who is telling the truth on devaluation. It’s not what the poor are looking for; it is not what Malawians want to hear. Whatever the case, Malawians are suffering; however, you look at it, devaluation remains a bitter pill to swallow.
Saving Malawi from further financial turmoil needs leadership that is honest. Yes, we have been told that the leadership has suspended external travel. We have also been told that they will instill fiscal discipline in the civil service. But for many years now, that is where it starts and ends. That is how politicians operate. And that is why we are getting angrier by the day. Politicians take us for granted. They think we are daft. When we ask probing questions we are perceived as enemies of the state. What happened to the notion of checks and balances? I still recall that those who are governing are employed by us – the voters and taxpayers.
We will continue to argue about devaluation because of its aftermaths – which are always painful. Its after-effects are unpleasant. We will have problem understanding devaluation not because we are semi-literate, but because we think those who lead us should have done a better job to grow the economy and avoid this evil.
In the name of saving Malawi, don’t hurt the poor; in the name rebuilding the economy don’t keep us in the vicious circle of poverty forever. The year 2023 has been a watershed of sorts – Malawi faced some crises but there also have been good things to write home about. Largely, though, we have suffered a lot. It matters less whether or not you belong to the ruling party or the opposition to believe this.
Until now, we are not a failed state. There is still light at the end of the tunnel. What our leaders need to do is to get down to work to cushion the negative impact of the devaluation. Otherwise, we have just embarked on a long journey whose toll on Malawians will be so heavy.
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