Malawi cuts rates to 20%

13/11/2006 13:57

ilongwe - Malawi's central bank on Monday cut its bank lending rate by five percentage points to 20% because of lower inflation and an improving economy, a bank spokesperson said on Monday. "Inflation has been dropping tremendously this year," central bank spokesperson Mirriam Wemba said. "We can (now) forecast that by December next year, the (inflation) rate will drop to (around) eight and five percent," she added. The International Monetary Fund, which last month cancelled 90% of Malawi's debt burden of $2.9bn, wants to see inflation for 2006 reduced to single digits in the impoverished southern African nation. The National Statistical Office put year-on-year inflation at 12% in August. Financial analysts welcomed the central bank's decision, adding the reduction in rates was long overdue. "This will stir production and growth," said Sadwick Ntonakuntha, economist at Malawi's chamber of commerce.

Creditors continue to write off Malawi's debts

afrol News, - Malawi is enjoying a great deal of benevolence from its creditors that continue to cancel the country's huge debts. First, it was the Paris Club that announced that it would write off Malawi's stock of debts on 19 October.

Now it is the turn of Japan that has done tremendous efforts to lobby for Malawi to have its debts written off by the World Bank and International Monetary Fund through the Highly Indebted Poor Countries (HIPC).

Malawi owed Japan US$ 250 million, which amounted to over half of the cancelled debt. The two countries went further to sign a new grant of kwacha 860 million (US$ 5.9 million) for the improvement of rural health facilities.

Debt cancellation signals a major victory for the economic policies of President Bingu wa Mutharika.

However, Malawi continues to sign more debts and grants so as to grease its economy and improve better living conditions for its citizens.

It signed a grant agreement with African Development Bank (ADB) amounting to US$ 22.2 million. The grant will allow Malawi to finance small holder crop production and marketing project.

The agreement was signed by the bank's group Vice President for Sector Operations, Mrs Zeinab El Bakri and Malawian Ambassador to Egypt, Mr M'Madi Yahya in Tunisia, an ADB statement stated.

Mrs El Bakri emphasised the importance the bank group attaches to portfolio quality improvement and timely fulfilment of the grant conditions.

"As the Bank undertakes to support this operation, we look forward to working closely with the government to ensure its timely implementation and also build synergies with other Bank activities in the sector in order to alleviate poverty and increase the income of the population of Malawi," she said.

Ambassador Yahaya commended the bank for its" relentless efforts" in supporting Malawi's development programmes. "We do not take this gesture for granted. The government of the Republic of Malawi would therefore like to assure you that it will continue to follow the laid down procedures in implementing Bank-funded projects," he added.

The project comprises the development of irrigations and the mitigation of environmental impact as well as support to farmers in crop production, management and marketing. It will cover 19 of Malawi's 28 districts.

It was also said to contribute to poverty reduction and food security in rural Malawi by increasing productivity and income of rural households. This was to be achieved through the intensification and diversification of the existing cropping system and improvement of the marketing system which will significantly increase production, productivity and incomes of small farmers while improving household nutrition and environmental management of natural resources at the same time.

The estimated number of beneficiary households was said to be 8,756, or a total of 45,531 people of which 4,000 were households headed by women. About 76 percent of Malawi's rural population was to benefit, directly or indirectly, from the market improvement activities, according to the bank's optimistic figures.

Give credit where it is due MCP
By Daily Times - 24 October 2006 - 03:55:44

There is this fallacy about opposition politics: that their sole role is to criticise government and criticise, even when that government is doing very fine for its people, especially on the economic front.

Sadly, that is what seems to be the malady of Malawi Congress Party (MCP), and their decision to stay away from the party that this country erupted into after the yoke of international debt was lifted, was not understandable then and is still not understandable now.

The stance taken by MCP, the refusal to give due credit to those in this country who spent sleepless nights for this country to be given debt relief, is a stance that will ultimately not win this party many sympathisers and votes.

For the record, the debt that Malawi was relieved of was not accumulated in the period that the DPP government has been in power. Much, if perhaps not all of that huge debt was accumulated during the period when the MCP and later the UDF were in power.

Some people in this country are not entirely convinced that the debt we all collectively were responsible to pay back to the World Bank and IMF was entirely put to good use. There are many people convinced that whereas it was the rest of us condemned to paying back this debt, some of that money was abused that it eventually found its way into some people’s private pockets.

In fact, it is true that with our low productivity, with our perennially underachieving economy, the burden of the debt was enormous and it’s a wild guess how long it was going to take this country to pay back. Other people say it was going to take generations.

Again for the record, attempts to have the debt forgiven, partially or wholly, did not start with the government of Bingu wa Mutharika.

The previous administrations tried and failed to win donor confidence to have the debt wiped out because, by and large, the donors were afraid that they would throw good money after bad.

The IMF and World Bank were not entirely convinced that if they relieved us from paying for money some of which our leaders had squandered, we would not go on and do more of the same.

Remember that for a long time, Malawi was being asked to trim down on the size of its bloated cabinet, to cut down drastically on domestic and international presidential travel and to spend wisely within our means because some of our expenditure was becoming too much of a strain on the national budget, even delivery of service to crucial public institutions was suffering as a result.

So, there had to come a government that was to convince the Bretton Woods Institutions that it meant its word, that it had the political will to bring this country back from the brink of spending as if money kept falling like manna from heaven.

The MCP knows that the IMF and the World Bank did not just wake up and declared us free from debt. There was a period that they monitored this government and if there was to be a moment that they doubted the sincerity of this government, we would have long been left in the woods.

It’s very interesting some of the things the MCP has said, but it takes a strong man to salute the good done by an adversary.

It is by admitting that the DPP-led government did us good by winning the confidence of the IMF and World Bank that the MCP will show that it has come of age.

Malawi paying a price for the political choice we made in 1994 and 1999 electing Dr. Bakili Muluzi as President whose government recklessly borrowed from the domestic market, leaving us and our children with a huge debt burden to settle Honourable Folks, coming from a background of financial mediocrity that led to frequent closure of the donor aid tap during the Bakili Muluzi administration, the news that multilateral donors have now forgiven 90 percent of our USD2.9 billion external debt is quite a remarkable achievement by the Bingu wa Mutharika administration. Congratulations Mr. President and your government! I fully understand the excitement that led to the special presidential address to the nation through MBC and TVM on Friday night, hours after World Bank, IMF and Ministry of Finance announced the good news at a joint press conference in Blantyre. The debt relief means we won’t have to spend K15 billion annually servicing the external debt for the next 20 years. Quite a big save indeed and, used prudently, can make a difference in the social and economic spheres of life. I think I’m justified to assume that part of this money will be spent on drugs for our public hospitals so that they can stop being called “departure lounge” for the grave. Education, too, needs attention if our children are to avoid getting jobs fraudulently by using fake certificates as is already the case now. We do not only need chalk, books and other material resources but also well-qualified and properly-trained teachers to take over from the secondary school dropouts who are currently cheating pupils in the many unregulated public and private schools that came with multipartyism. In agriculture, there’s need for an urgent and serious campaign to wean villagers from rain-fed farming which makes us beg for food virtually annually when Lake Malawi and Shire River have fresh water flowing along the entire length of the country from Karonga to Nsanje the whole year round. Why not combine rain-fed and irrigation farming so that we can harvest three to four times as is already happening in the Manthimba Irrigation Scheme in Thyolo? How I wish the previous regime had controlled borrowing from the domestic market. We would’ve been saving much more than K15 billion annually! Unfortunately, domestic debts incurred by the previous regime to finance imprudent public spending are 100 percent the burden of yours and mine. Only that as we are struggling to pay, it’s better to realise we are paying a price for the political choice we made in 1994 and 1999. We elected Dr. Bakili Muluzi as President whose government recklessly borrowed from the domestic market, leaving us and our children with a huge debt burden to settle. I hope this should teach Malawians to be more critical in future elections. But while Mutharika seems to be making enviable strides on the economy, his political performance is a disaster. Media reports portray Mutharika as a person who is desperately using bare hands to prevent political turbulence from destroying his political pillar, DPP. As the Attorney General’s office is trying, through the courts, to save the political careers of MPs who defected to DPP from other parties represented in Parliament, Mutharika himself, has a tough time convincing the MPs and other MPs that his party is anything but quick sand. Reports indicate that this week he had an audience with some of the defectors who allegedly wanted to go back to the parties that sponsored them before the courts rule on section 65, trying to convince them that they are safe in DPP. As this is happening, the Hon. Joyce Banda has quit DPP as secretary general, former Attorney General Ralph Kasambara and regional governor for the South Samson Msosa have quit the party altogether. Have we seen the last of these resignations? Hard to tell. There is absolutely no basis for optimism, especially considering that DPP is predominantly made of “recycled” politicians who ditched their old parties not so much for the love of Mutharika (there was none in 1999) as it was for the money and opportunities contained in his presidential wallet. Mutharika is likely to be significantly detracted from the business of running government if he has to get involved in patching up holes that easily appear on the walls of his unstable DPP. The question is: is it worth it? To build DPP, Mutharika had to poach from MCP, UDF and other parties, thereby souring relations with leaders of these parties. They are so bitter that they don’t even attend public functions. Sometimes they vent their wrath on innocent Malawians like Tumalisye Ndovi who has been denied the opportunity to serve as director of the Anti Corruption Bureau for no clear reason. DPP has also been a cause of strained relations between Mutharika and the civil society. They don’t like the use of vehicles from statutory corporations for carrying DPP supporters to presidential functions. Yet, for all the trouble, DPP still remains too weak numerically in Parliament to enable the Mutharika administration to push important bills on its own. Am I the only one who sees the folly of depending in Parliament on the goodwill of the same opposition parties the government side poaches from in its desperate efforts to make DPP an effective ruling party?

Debt relief good, and Bakili Muluzi's UDF's failure to obtain it while sadly digging potholes for those coming behind them to crash into.

06/09/06—Admittedly, one of the best things that has happened to Malawi in the past 12 years is the writing off last week of 90 percent of the country’s foreign debt—over K406 billion—by the International Monetary Fund and the World Bank. This sweet news would not have come at a better time than now for Malawi which badly needed this respite from donors.
As many commentators have said, no one can take away the credit from President Bingu wa Mutharika’s administration with Goodall Gondwe at the helm of the Finance Ministry for achieving this feat. This is especially so considering how remote debt cancellation looked only two years ago.
As we give credit to government for killing this beast and bringing its carcass home, mention should be made of the fact that the development has not just come like manna from heaven. Government was required to follow a strict fiscal regime to reach the completion point to qualify for debt relief. Debt cancellation has come through traversing a path the former government, for all its bragging about as a government that had economic development and the welfare of the people at heart as its number one agenda, not only failed to tread but also sadly dug potholes for those coming behind them to crash into.
One thing that was evident on the journey to debt relief was political will. Against all odds, government was not swayed by the need to be politically correct and kept faith with the strong desire to bail the country out of economic malaise. Honest Malawians will not be shy to admit that they never saw anything close to this—economic prudence—from the previous administration.
I am actually reminded about rude statements we usually heard like “I would rather be poor looking up than down, Ndimadya kwanu? We are a sovereign state so nobody should push us around”, etc. And if what someone has said that bad politics is barrier economics is anything to go by, then conversely, and for all its altercations with the opposition, the Mutharika government has been practising good politics. Which is why I believe even the opposition, well-known for their meanness in appreciating government’s work, have been generous in showering praises on government, a point I need not belabour.
With this good news, maybe it is about time we started afresh politically as well. We should do away with hate politics that has characterised most of the post-single party era. We should bid farewell to politics of vengeance. Let us avoid tit-for-tat. Such politics confirm people’s worst fears for hypocrisy which has come with government’s much-touted stand on zero-tolerance against corruption and graft in high offices. This is because tit-for-tat implies that government is selective in dealing with vices it is supposed to root out without looking at anybody’s face. An-eye-for-an-eye means that as long as you do not offend the powers that be you are safe even if you may have a cupboard full of skeletons.
Government could also do well to take debt cancellation as an opportunity to look back at the stumps it has crashed into along the way. The road has not been rosy. Government has made so many mistakes most of them with disastrous political and financial consequences. The most recent ones being the arrest of Vice President Cassim Chilumpha and 10 UDF cadres in connection with their alleged roles in Mutharika’s assassination plot. Government should ask itself if it is doing the right thing that nothing is happening on the assassination case six months after the arrests. Is the long delay in holding a judicial review justifiable?
Another grey area President Mutharika may do well to revisit is the hiring and firing of senior government officials which he has been doing willy-nilly. While it is his prerogative to do so, one wonders if he can justify such. Are all the people he has been firing unsuitable?
Lack of constitutionalism is another cancer in the Mutharika administration that needs to be removed. The calls for impeachment for violations of the Constitution may have been exaggerated but were not from without. And the fact that those peddling impeachment have not gone very far in materialising their objective does not absolve Mutharika of the blame. The President should have been in the forefront of defending rather breaching the supreme laws of the land. The list is long of things the President would have done better during the two years of his rule. But I think I have made my point.
As for the money freed by the cancellation of debt, the bottom line is that debt relief will be meaningless if the money freed from the development is not used to spur economic growth. With this money, let the masses see change in their lives.