Peter Mutharika lied on economy — Economics Association
The Economics Association of Malawi (Ecama) has hinted that President Peter Mutharika did not only lie in his state of the nation address issued in commemoration of his one year rule but that his ruling Democratic Progressive Party (DPP) has not lived up to its set goals within the year.
Ecama president Henry Kachaje made the observations when he presented a paper this week in Salima at an event that was organised by Centre for Human Rights and Rehabilitation in partnership with Freedom House to reflect on Mutharika’s performance in the last 12 months.
Kachaje however said according to reality on the ground one wonders how our economy “continues to enjoy positive growth of 5.5 percent” when two major economic sectors- the private and agriculture-experienced a decline in their productivity and output.
“How can we be sure that ‘the economy is expected to rebound to higher levels averaging 7 percent’ when we have just experienced the worst floods in recent history and agricultural output is expected to drop by 30 percent,” he queried.
Kachaje also said there is no way Malawi should expect the inflation to drop further from 18.3 percent to 16.5 percent as Mutharika projected when Malawi is facing hunger and prices of food are likely to go up.
“How will the interest rates go down when inflation is unlikely to drop significantly? How will people’s disposable incomes increase when they will be buying food at higher prices?” he queried.
Kachaje said unless if the country is expecting miracles from heaven the projections that the president raised are unrealistic.
President Mutharika said in his address that the Malawi economy enjoys positive growth despite the challenges faced this year as a result of floods and dry spells that affected agriculture production.
“It is estimated that the economy grew by 5.5 percent and it is expected to rebound to higher levels averaging 7 percent or higher from next year,” he said.
The President also said the inflation has decelerated from 24.2 percent in November 2014 to 18.3 percent in April 2015 chiefly due to relative strengthening of the Kwacha supported by a declining pump price of fuel.
“We expect annual inflation to fall to 16.5 percent in 2015 compared to 23.8 percent in 2014. The decline in inflation is expected to increase people’s disposable incomes and interest rates are also expected to decline in 2016,” Mutharika said.
He also said the foreign exchange rate has continued to stabilise as a result of government initiatives to stock enough foreign exchange reserves which have been more than three months import cover.
“This has enabled the private sector to plan and be able to import their raw materials for industrial production without much difficulty,” he said.
But Kachaje said while it was true that the foreign exchange stabilised within the past year, it was not necessarily because of increased exports as Mutharika suggested. He attributed the development to the fact that the country sold part of her domestic debt to PTA bank in exchange for forex injection into the economy, which he described as an ingenious intervention.
The economist said although the import cover has grown to three months, it is not because Malawi earned more forex, but because she borrowed.
“There has been a slow down in the economy, and fuel imports dropped by about 30 percent,” he observed.
Kachaje also interrogated the DPP promises as outlined in its manifesto which he said have not shown any signs that they will be fulfilled as demonstrated in the year under review.
This includes its promise to double exports in the next five years; re-establish food security for all Malawians; pursue zero tolerance on corruption, bribery, fraud and theft of government resources as well as prioritising education and aim to eliminate illiteracy by 2019.
He also said the DPP pledged to ensure that no child should have to walk more than five kilometres to attend school and that they will also provide total security to both persons and businesses in Malawi.
Kachaje also pointed out that the DPP also promised to pass and implement a number of laws including: a Law on Handouts and a Law that will prevent sitting Members of Parliament from benefiting from increasing their own salaries and benefits.