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The Malawi – IMF Standoff: Malawi Held at Ransom

"The priority of my government is to resume the economic programme with the International Monetary Fund (IMF), so that we can access resources necessary to fix the growth process," Mutharika told the National Assembly way back in June 2004.

Seven years down the line, to be precise on Thursday December 29, 2011 President Bingu wa Mutharika ordered officers of his government to follow his line of resolving the current economic problems in Malawi or if not, “honourably decide to resign”.

President Mutharika’s way forward to resolve the economic crisis from his recent statements is to reject calls for the devaluation of the Kwacha because as far as he is concerned doing so would heavily and negatively impact on welfare of poor Malawians; blame Satan, the Malawi Congress Party (MCP) and the United Democratic Front (UDF).

“I have argued that while the villagers will be suffering, the economists will have options for survival but not the villagers who have no jobs and any source of income,” said Mutharika and he went on to describe some local economists, advocating for the devaluation, as ‘brainwashed by colonialists.’

The ‘colonialists’ he was referring to is the same IMF that was top of his agenda in 2004 and throughout his first term. Ironically, it is compliance to and support from these “colonialists” that bankrolled his success from 2004 to 2009. The IMF country representative Ruby Randall has since diplomatically and wisely we should add, reserved her comments on President Mutharika’s unfortunate remarks.

The thrust of the case for devaluation is that it would help solving the forex shortage as people would be forced to shun the black market whose rates are currently competitive and opt for the formal markets through established and regulated commercial banks. Needless to say, Mutharika’s stance has left the Reserve Bank officials in a quandary.

While the IMF is not always right, Malawi right now is not in a position to be obstinate. Beggars have never been choosers and sovereignty is only meaningful when a country can independently provide basic services to its people.  Of course, Malawi is miles away from attaining this.

One precondition for the resumption of budgetary support by Malawi's donors under the Common Approach to Budget Support (CABS) is that Malawi revives its International Monetary Fund (IMF) program or forget their financial assistance. The IMF has therefore grabbed Malawi where it hurts most.

From this, it is very clear that the aid taps will not re-open unless Malawi meets the IMF conditions.  The ministers of finance, foreign affairs and their hangers on can traverse the globe trying to sweet talk development partners, but this will yield nothing in that face of a Malawi Government – IMF stand-off.

While devaluation is indeed not the only remedy, and on the contrary is a bitter pill to swallow, taking action now is more advisable. Memories are still fresh of how President Mutharika held Chancellor College to ransom as he fought a battle of ego with the lecturers only to make an bout turn when it became clear that the lecturers would not budge.

To conclude, Malawi is where she is today as a direct result of executive arrogance. It is not the IMF that told Malawi to buy a luxurious jet. IMF did not advise Malawi to gun for the African Union chairmanship that triggered presidential voyages of discovery that have not borne any fruit. The IMF did not force Malawi to continue depending on tobacco nor for that matter to expel tobacco buyers. The IMF did not declare Mr Fergus Cochrane persona non grata. All these misguided actions were of our own making.

Therefore, President Mutharika should stop intimidating officials at the Reserve Bank and the Ministry of Finance as they labour to again bring Malawi in good books with the IMF. This is what Mutharika did 2004; and unless he has alternatives; he should let the Reserve Bank officials act now and stop using the poor as a human shield.

After all the poor never featured on his agenda as when President Mutharika chose to wallow in obscene extravagance and arrogance. On the contrary, accessing budgetary support now is the only way to alleviate their plight as they labour under the yoke of the taxes that came with the zero deficit budget. And worse still, most of  the problems Malawi is facing are of Bingu’s making and the least he can do is to swallow his pride and accept the IMF dosage for the ailing economy to come back to life.—

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Comments  

 
0 #4 phil 2012-03-21 02:18
dear che, you may wish to note that the president swears to protect the citizens of malawi. yes textbooks hardly work. this devaluation is there to enable the country get (1). the much needed forex which has dried in banks (2). help the same govt to implement its budget. a reasonable govt therefore would under all circumstances develue the kwacha. after all, raising taxes and borrowing more money to implement the budget are a technical domestic devaluation. as an economist specialised in this field i am 100% certain that H.E. is wrong and the IMF are right. Raising taxes is aimed at achieving the same goals that a devaluation might have achieved less forex availability. since when have we feared inflation to this extent. H.E. by virtue of not devaluing our note is putting the lives of 15million malawians in danger. Fine we wont devalue what do we achieve instead. nothing but self esteem. if we devalue we get the forex and the drugs for hospitals. this is protecting the citizens.
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0 #3 ine 2012-01-23 12:37
"While devaluation is indeed not the only remedy" you write. What alternatives do you propose, Mr or Ms Online Journalist
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0 #2 che 2012-01-12 00:51
the president is absolutely right that devaluation is going to harm ordinary people in the villages.the imf has not told malawi how inflation will be dealt with after devaluation.the currrency was devalued some months ago by 10 pts and it did not improve anything.textbook economics is not the solution.i have never heard of a country which achieve economical success through sick policies of imf.china is booming through its own policies not imf.malawi has to come up with its own policies.
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0 #1 John Manda 2012-01-11 13:55
Mr.Man, we are done with you. we loved you but you have let us down. see you in 2014.
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