..leaves IMF, donors dumbfounded
.. 1 year, 10 months before elections this could be his end
..give me six months- Finance Minister
Malawi descended into economic chaos and President Lazarus Chakwera planned not to be in Malawi when the devaluation and its explosive consequences were to happen, his typical trademark of running away and not taking responsibility for anything under his administration.
The steep devaluation has shocked both the IMF and donors, who anticipated a gradual process which they say could have included adjusting economic fundamentals including controlling government expenditures- even cutting down frequent flyer programmes the President is now renowned for.
But there is no plan, literally, from Government.
The decision to devalue the Malawi kwacha by a whopping 44 percent to meet the International Monetary Fund (IMF) Extended Credit Facility (ECF) four-year programme, however, will mark the final political nail for the beleaguered President who seems not to understand basic economics, let alone capable of appointing people who have a grasp at what needs to be done.
The IMF Executive Board is on Tuesday expected to give a green light to Malawi’s US$174 million (K295 billion) four-year programme, but senior officials said they do not anticipate the funds would make a difference as the devaluation does not have any backup plan.
Malawi Congress Party (MCP) senior figures have tried to blame former Finance Minister Sosten Gwengwe, accusing him of “being Peoples Party loyalist” as he signed the IMF programme in September committing to devaluing the kwacha by October 31, 2023.
Treasury competence under microscope
Finance Minister Simplex Chithyola on Monday exposed President Chakwera’s administration lack of preparedness presenting old age social protection measures as new measures to curb devaluation, raising questions about the competence of the team at Treasury.
“Nothing is new, Cyclone Freddy support has nothing to do with economic recovery nor devaluation. It was there, so too cash transfers and urban support. The Minister did not say anything new; it means he has no plan. He devalued on principle of ‘mimba tiye ambuye alikonko’. What was said yesterday does not amount to any recovery,” said a senior Treasury official.
The Minister shocked the media when he decided not to answer questions and someone indicated that he had been rushing to airport to travel to Tanzania, another serious anomaly as he needs to be in Malawi to manage the devaluation chaos.
The Treasury has failed to produce a tangible recovery plan and since President Chakwera assumed office, the devaluation has been a continued trend whilst arrogance from the presidency and his wailers has been that Malawi is improving contrary to the situation on the ground.
The President has changed three finance Ministers who have failed to revive the economy and until now there is no clue as to what measures will government undertake to turn around the economy apart from the shocking devaluation.
44% devaluation ridiculous, IMF, donors shocked
The Investigator Magazine can reveal that the devaluation which Reserve Bank of Malawi kept denying publicly for weeks before it hit, was part of Malawi’s own commitment to the IMF and that the body did not insist that it should happen at once.
Speaking to the Investigator Magazine from Washington DC, a senior figure in the African department asked Malawi to “read and negotiate” its positions to avoid economically catastrophic “devaluations” that sets the economy back to the “gutter.”
“It is shocking and ridiculous that Malawi was asked to present a plan to devalue the kwacha and corresponding mitigation measures. Anyone who understands Malawi economy appreciates the precarious situation it is. Damned if you do, damned if you don’t. But you don’t devalue 44% which will spike inflation and make foreign debt expensive, the same things we are trying to address,” said the official.
A senior diplomat with one of the donor agencies said the IMF request had room to manoeuvre as the Government could have presented a plan which could have expanded the targeted devaluation to up to two years of the four-year ECF.
“Blame your people who do not understand how the IMF works and fail to negotiate. Nobody in the right mind would suggest such a devaluation to an economy like Malawi with majority of the people depending on government social safety nets,” said the diplomat from Lilongwe.
He said the massive devaluation will make the cost of servicing international and domestic debt higher as interest rates are likely to go up as well.
Before devaluation debt had hit K9.4 trillion, with 60 percent if it being domestic debt after government has been borrowing to finance its operations.
MCP officials blame Gwengwe, the tale of two blind men leading the nation
In trying to salvage their reputation, Ministry of Finance and ruling party officials said the “shocking devaluation” was done by former Finance Minister Sosten Gwengwe who signed off the letter of intent with Reserve Bank of Malawi Governor Dr. Wilson Banda.
“Everyone was shocked, he sent the letter of intent without wider consultation. This was done on 20th September. The questions are those two are aligned with Peoples Party (PP) this could have been sabotage,” said a senior figure in trying to exonerate the new Finance Minister Chithyola.
Chithyola is said to be an appointee of the powerful Secretary to the President and Cabinet Colleen Zamba and his appointment which was met with public murmurs amid IMF negotiations now proves the political theory that Gwengwe was removed for being suspected to have been plotting to sabotage the government.
“This is laughable. Nothing has worked for this administration. The weakest link is a President who does not understand economics. He appoints another one who is worse than him. This economic disaster has been in making for long. Two blind men leading us to find treasure is unheard of. We have come from John Tembos’ Aleke Banda’s and Goodall Gondwe’s to such calibre as finance ministers, well that’s the price you pay. You plant lemons, do not expect apples,” said an economist who has met President Lazarus Chakwera before, adding that the Malawi leader has avoided debate on the economy and cannot expound any idea about fixing it.
Give me six months- Chithyola
Finance Minister Simplex Chithyola now under fire from all sides, says he needs six months for Malawians to judge his capacity to deliver the economy from where it is to a safe zone, saying the historical debt from previous regimes had chocked the nation.
“The debt is matured, the projects are not there save for some infrastructure. Our biggest challenge is debt. I take responsibility as the incumbent Minister of Finance, but give me six months and come back and let us a proper interview,” said Chithyola in a brief interview.
The Minister said he could answer the “ifs and whats” as the government had already committed to devaluation and the best, he could do now was to manage the situation that the poorest are not hurt.
The Minister told Malawians that the devaluation could be understood in the deep wisdom of the biblical story of King Solomon when he presided over a case of two women who turned up with a dead child. The analogy has attracted mockery on social media.
Cyclone devaluation- the aftermath
The Church, Civil Society, and the public- through radio and social media, are pronouncing the decision to devalue without any mitigation as the beginning of an end for President Lazarus Chakweras administration.
The Malawi Congress of Trade Union (MCTU) has asked for a 44% increase in salaries and wages and that minimum wage be adjusted from K50,000 to K100,000 with immediate effect.
Prices for agricultural inputs, fuel and groceries have now been pushed higher with many in the banking sector predicting that interest rates will follow as inflation spins out of control.
“The excuses we give like Ukraine and Cyclone Freddy are genuine. But the issue is that our leaders have failed to manage the economy, hence they can’t manage politics. Tell them to sit down and not fly around everywhere. They need to show that they understand that things are not okey,” said Father Boniface Tamani, a Catholic priest in audio circulating on social media.
Unpopular President, unknown future
Malawians have resorted to taking to social media pages of President Lazarus Chakwera and government officials to express their “feelings” over his administration, but polling shows that the President and his Malawi Congress Party (MCP) popularity has sank very low.
The Investigator Magazine’s monthly political polls before the devaluation pegged the Presidents popularity at 10%, far below former President Peter Mutharika (38%), President Joyce Banda (24%) and Vice President Saulos Chilima (23%).
The last national wide survey in May 2023 gave the President 18%.
Over 1.5 million farmers were told in September they are no longer on Affordable Inputs Programme (AIP) and only 30 percent of fertiliser was available by end of October 2023, a key political programme that is used to garner votes but has been in a mess since 2021/22 farming season.
Food shortages and rising prices especially in the Southern Region, with Jali in Zomba a 50kg bag of maize hitting K50,000 in October, have seen the President’s image get battered as his response to the crises have been muted.
“The devaluation and its impact on the farmers who are a majority of voters is huge. No fertiliser, removed from AIP, now they must pay more from the election promise of K4,500 to having to pay extra for transport, all counts against the President. If he has honest advisors, he needs to reset his administration, fire all bad elements, hire a proper communications teams and hope for a miracle that he can be re-elected,” one of The Investigator Magazines pollsters suggested.
President Joyce Banda in 2012 devalued the kwacha and she never recovered from some of the anger that Malawians had in the aftermath. President Chakwera only has one year and ten months in office before facing an angry electorate.
President Chakwera, known for making flowery speeches is set to address Malawians after returning from his 44th international trip that took him to Saudi Arabia and Egypt. No changes to Cabinet or Government are expected according to insiders.