IMF: Malawi's Economic Backsliding, Uprisings Cause For Concern

The International Monetary Fund said it is "sad and concerned" that Malawi's economy seems to be moving backwards.

Last week, 19 people were killed after police opened fire to quell looting and protests against President Bingu wa Mutharika. Thousands of protesters accused Mutharika of mismanaging the economy which has led to acute fuel shortages, and of trampling on democratic freedoms.

"We feel very disturbed that Malawi has taken this turn," Janet Stotsky, the IMF mission chief for Malawi, told Dow Jones Newswires in a telephone interview from Washington, D.C.

Malawi's economic problems are fueled by a persistent imbalance in external trade--the country imports much more than it exports--leading to a shortage of foreign exchange, Stotsky said. And while the IMF has suggested that the government depreciate its currency to close the gap between imports and exports, the president has resisted, she said.

Rafiq Hajat, a protest organizer, said protests will resume if the president doesn't heed some IMF recommendations and lower taxes on fuel and food by mid-August.

Hajat, executive director of Malawi's Institute for Policy Interaction, a think-tank, said Tuesday that Mutharika had until Aug. 17 to reform economic policies or protesters would be back in numbers.

"If we didn't stand up at this point in time, the downslide toward dictatorship would've been irreversible," Hajat said.

The economic situation and the fuel shortages are being exacerbated by foreign-exchange problems, Stotsky said.

Dollars are being sold on the black market at a substantially depreciated rate from the official one, leading to higher prices for imports and making it difficult for importers to source foreign exchange to pay for fuel. In addition, fuel suppliers are no longer giving Malawi credit lines because of the problems they have had obtaining foreign exchange.

Ruby Randall, the IMF representative based in Malawi, said that, to make matters worse, sales of Malawi's main export--tobacco--have shrunk 70% compared with last year, deepening the country's trade imbalance.

Human-rights groups have criticized Mutharika's regime and, in April, Malawi--a former British protectorate and a recipient of U.K. aid--expelled the country's high commissioner, Fergus Cochrane-Dyet, after he criticized the president on governance issues in leaked cables. Following the spat, the U.K. government withdrew its aid.

The U.S. Tuesday said it is putting its $350 million aid package to the country on hold.

Slashed aid from the U.K. and other international donors is exacerbating Malawi's current account imbalance, to the point where the government is becoming unable to import sufficient essential commodities, especially medicine, Stotsky said.

Tim Hughes, a political analyst at the South African Institute of International Affairs, said Mutharika has become increasingly recalcitrant on freedom of speech and association.

"What's fascinating is that I have seen nothing coming out of the Malawian government that has attempted to acknowledge or recognize that these protests are legitimate," Hughes said. "It's an extremely peaceful and placid country and this symbolizes something much deeper."

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