Beating about the bush
"for a critically ill patient a large bunch of medicines at the same time can in fact kill him/her much quicker than no medicine at all"
This is what is happening to the Malawi’s economy now. The two chief doctors of the economy (ministers of finance and economic planning) seem not to have a clue of the right treatment. As a result they are swashed with lots of proposals for treatment but they cannot isolate the wrong from right advice. I am not here to blame them, but perhaps add my opinion to their many proposals.
In times of recession or low economic activity, the government is left with two key choices: 1) take broad-based austerity measures aimed at reducing the overall government expenditures by prioritizing funding to only essential and vital services to match with revenues collections. This option, however, can keep the economy at standstill hence make it vulnerable to further shocks; 2) raise extra revenues from borrowing from ‘donors’ to cushion the economy, that is, cover the deficits in current account and budget.
Mostly due to bitter relations with the donors and that the donors themselves were running deficit governments, Bingu (may his soul rest in peace) knew that borrowing was not an option. He instead focused on his ‘unpopular’ austerity zero-deficit budget. Foreign exchange resources were the most scarce, fuel, drugs and other imported commodities were almost not available. I guess if Bingu had managed to borrow substantial amount of foreign exchange, the fuel queues and medical drug shortages in hospitals could not have been as worse. For example in March 2012, while office pump price of petrol was MK390 per litre, but due to scarcity people were buying on the black market for as high as MK550. We all blamed Bingu especially his diplomatic style for the suffering, and chanted on streets all bad names on earth for him and his government. His departure (may his soul rest in peace), was to some people seen as a solution to the Malawi economy, as donors said they are withholding assistance to Malawi because of Bingu’s poor governance record.
Donors should be explicit of their commitment and commercial interests
With taking over of Government by H.E. Mrs Joyce Banda, people’s hopes were high, that donors would now release the much need foreign exchange to import the fuel, drugs and other importables. However, the experience is different from the expectations. The IMF and other donors instead of assisting our leader with the foreign exchange resources, they tell her to go on open market and raise her own foreign exchange resources by discounting the Malawi Kwacha (massive devaluation), a thing that Bingu preached a very evil to the poor. They go on to advise her to maintain austerity measures introduced by Bingu, and give her meagre resources (some even in single digit million US dollars or less) as if they are supporting a local NGO. These small money comes with hefty conditionalities, most of which are highly counter-productive and punitive to the poor such as the tax raises, Malawi Kwacha devaluation and its floatation.
The current combination of policies (austerity measures and floatation of Malawi Kwacha) are disastrous. Fuel is now available in most filling stations but at a price more than it was freely supplied on black-market earlier in the year. Inflation rate has more than doubled within a space of less than 8 months. The light at the end of tunnel is very dim, despite her H.E.’s numerous visits to the donor capitals, she comes back with only promises. Most gravely, the economy (GDP) is almost in recession (projected growth rate 1.6%).
The issue here is clear, austerity measures aimed at transferring the burden to the citizens has just pushed the poor to death as the little they earn is worthless as inflation soars; kill effective demand on the market hence both sales volumes and profits dwindle; business shut down, people lose jobs due to low profits or losses; government tax revenue collection base is weakened as VAT on sales, income taxes on profits reduces, and PAYE on devalued salaries mean nothing.
Borrow and fill the import gap now! Malawi needs a big push and not just austerity
"when a patient is severely anemic either due to malaria or loss of blood in an accident, direct transmission of donated blood is more appropriate to save the life of the patient than just a better diet"
This is not the time to worry about debt levels, that is, debt:GDP ratio, but rather time to rescue the ailing economy headed for recession. In these hard times, government should (as most countries do, including the donor countries) slow down on austerity measures as it is shooting is own foot, but instead it should borrow adequate foreign exchange resources, at least in the short term, to cover the current account deficit, that will cover up for wanton depreciations of the local currency, maintain a manageable inflation rate, maintain households’ purchasing power, maintain effective demand on the market, maintain business sales volumes and profits, maintain jobs, maintain government revenue collection levels, maintain public provisioning of essential commodities and services (health, education, security, etc). The borrowed and locally generated resources should be invested in short-term demand creation, development of exportables in the medium to long term.
