Malawi on the road to recovery - but the hard part's just beginning
- Simon Allison
- 17 Jul 2012 08:42 (South Africa)
In just a few months, Malawi’s new president has undone much of the damage caused by her predecessor by implementing safe and sensible economic policies. Joyce Banda’s impact is stark: food is cheaper, fuel is available, and donors are flocking to give her government much-needed cash. But this was the easy part. Now, she needs to figure out how to drag Malawi out of poverty, and prevent another Mutharika from undoing all her good work. By SIMON ALLISON.
It’s official: Malawi has got its swag back. At the AU summit, foreign minister Mganda Chiume – there on behalf of new president Joyce Banda, who decided not to attend after the summit was moved from Malawi to Ethiopia – told reporters that donors were now releasing aid money that had been suspended during the tenure of the late Bingu wa Mutharika.
Already, Britain has pledged some £58 million (R745 million), of which £33 million has already found its way into Malawi’s depleted coffers. And the Millennium Challenge Corporation has reinstated a $350.7 million (R2.9 billion) compact to overhaul the failing national electricity grid. Even more importantly, the International Monetary Fund issued a “letter of comfort” to Malawi last month, which is basically a notification to donors and investors that it’s safe to resume financial relationships with the country.
The restoration of aid money – which, when it flows, accounts for 40% of government budget – is completely thanks to a series of bold decisions from Joyce Banda’s new administration. Since taking office in April, the new president has been busy overturning many of her predecessors’ more egregious policies. She has resumed diplomatic relations with Britain; devalued the Kwacha by a third, as per IMF advice; sold the presidential jet and fleet of presidential limousines; and issued a series of calm, sensible statements about her economic vision for Malawi.
This has given impoverished Malawi a little breathing room. A key indicator in the country of economic well-being is the price of fuel, which earlier this year reached levels high enough to cause riots in the main cities. Under Banda, the fuel price has decreased by 10%, and it is far more easily available, thanks to better management of foreign reserves. The cost of commodities has also decreased.
In neighbouring Zambia, President Michael Sata infamously promised during his election campaign last year to put “more money in your pocket” within 90 days of taking office. Nearly a year later, that promise remains unfulfilled. Banda, by contrast, has made her impact felt immediately.
That, however, was the easy part. Mutharika’s last couple of years in office were characterised by increasingly bizarre and insular economic policies, which artificially stunted Malawi’s economic development. Identifying and correcting these mistakes was a relatively simple task. Now Banda must find a way to kick-start that economic development, which was sluggish at the best of times.
Fortunately, Banda seems well aware of the problems. In May’s state of the nation address, she told parliament that there was still a lots of work to be done. “Malawi’s economy today can best be characterised as that of a household that has been living beyond its means, spending too much, borrowing to keep itself afloat and not earning enough. In our case, this imbalance can be seen in terms of our sustained balance of payments crisis, where we import far more than we export. It is also present in our fiscal deficit, where government has been spending more than its revenues.”
The president continued: “Mr Speaker, Sir, in both cases, we have traditionally relied on the donors to make up the difference. This is not only unsustainable in economic terms but also makes us vulnerable to changes of view or of fortunes outside our control. This explains why, Mr Speaker, Sir, it has been critical to liberalise our currency and to restore our relations with the international community.”
Banda then went on to outline her plan to turn Malawi around. It sounds promising. She wants to cut government expenditure, with a focus on getting rid of expensive luxuries – things like unnecessary foreign trips and over-sized presidential motorcades. She wants to eliminate corruption in the procurement process, to make sure the government pays a fair price for goods and actually receives them. She wants to create an enabling environment for businesses by reforming the revenue service and stream-lining licencing and regulatory processes. She wants to embark on an aggressive energy and electrification program, making use of all that money from the Millennium Challenge Corporation. She wants to boost local manufacturing, mindful of the need to increase exports so that the country can boost those all-important foreign exchange reserves.
These are all sensible ideas, and made excellent sound bites in President Banda’s speech. But now the president has to find some of way of turning these ideas into reality – always easier said than done.
And she’ll have to do so in the face of stiff opposition. When Mutharika died, his Democratic People’s Party (DPP) nearly collapsed in the chaos and confusion. Dozens of MPs deserted the sinking ship and joined the new president’s People’s Party (PP); the remnants that stayed put were dogged with rumours of a failed putsch on the night of Mutharika’s death. But under the leadership of the late president’s brother and designated successor, Peter Mutharika, the party is making something of a resurgence. Last Sunday, he held a rally which drew what even a pro-Banda publication described as “a massive crowd”, where he re-affirmed his decision to run in the 2014 elections and promised to restore Bingu’s legacy.
This is no idle threat; and nor is another Mutharika in State House just a remote possibility. Two years is a lifetime in politics, and unless Joyce Banda can make good on her grand economic plans, people will have forgotten just how bad the first Mutharika was – an outcome that Malawi simply can’t afford. DM
- Malawi says aid flowing back with IMF backing on Reuters Africa
- St Joyce of Malawi on Daily Maverick
- New president, new broom: Malawi’s about turn for the better on Daily Maverick
Photo: Liliongwe (Manogamo)
- Simon Allison