Malawi faces “long and hard road”
IMF Managing Director Christine Lagarde is optimistic about Malawi's economic recovery
BLANTYRE, 9 January 2013 (IRIN) - International Monetary Fund (IMF) Managing Director Christine Lagarde urged Malawians to stick with tough economic reforms during a recent three-day visit to the country, but measures recommended by the Fund and implemented by President Joyce Banda have been deeply unpopular with many citizens who can no longer afford basic goods and services.
Key among these measures was Banda's decision, made soon after she took office in April 2012, to devalue
the Malawian kwacha by 49 percent and untie the currency from the US dollar. The government also lifted subsidies and price controls on fuel.
The moves were designed to address chronic shortages of foreign-exchange reserves and key imports such as fuel, but they also triggered rapid inflation, which remains at 33 percent.
Lagarde pointed out that Banda had inherited "a serious economic crisis" and predicted that Malawians would soon start to reap the rewards of her recovery measures. But urban poverty is on the rise, and the Consumers Association of Malawi (CAMA) has called for nationwide demonstrations, set to take place on 17 January, to protest the rising cost of living.
"These reform measures are hurting consumers," CAMA Executive Officer John Kapito told IRIN. "There is a need to control the movement of the kwacha as well as the suspension of the fuel pricing mechanism."
Kapito said the government should develop its own economic recovery plan, including measures to protect poor Malawians, instead of adopting wholesale IMF's recommendations. "It only shows who is in control of this country. We will ask the government to reconsider its position; people out there are suffering."
But Chancellor Kaferapanjira, chief executive of the Malawi Confederation of Chamber of Commerce and Industry, insisted that the economy was already showing signs of recovery. "We just have to give the government time to implement some of the measures put in place."
At a market in Blantyre, Malawi's commercial capital, Tawere Dimba, a mother of four, was buying a 20kg bag of maize. "We cannot afford to buy the 50kg bag of maize," she said. "This 20kg will last a few days, and [then] we have to find more money."
Dimba said lately she had been surviving on the K300 (US$0.86) a day she received from working on a government programme to repair roads. "This money has helped us, but we are only expected to work for one month, and then another group will come in to take over," she said.
Lyson Fazili, a coffin maker at the market, said the devaluation of the kwacha had affected his business as he could no longer afford to travel to Zimbabwe to buy materials. "With the increase of prices and low sales, life is becoming difficult," he said.
Rising cost of living
A cost-of-living assessment released monthly by the local, faith-based organization Centre For Social Concern (CfSC) found that in the capital, Lilongwe, the total cost of basic food items and essential non-food items, such as housing, water and electricity, for the month of December 2012 was K91,632 (US$263) up 32 percent from K69,305 ($199) in December 2011.
The price of maize, the national staple, had risen particularly steeply, with a 50kg bag costing K4,500 ($13) in Blantyre, nearly double what it cost a year ago.
The CfSC report warns that low-income earners in Malawi's cities are increasingly unable to afford basic services such as water and electricity. The high rate of inflation is also taking a heavy toll on rural households in the south of the country, where a series of poor harvests have left nearly 2 million
people food insecure and in need of humanitarian assistance.
Despite the high inflation rate and the decline in maize production in the south, IMF has predicted a 5.5 percent growth in Malawi's economy in 2013 (double the rate estimated for 2012) - provided the government stays committed to economic reforms and normal weather conditions prevail.
"Malawi still has a long and hard road ahead," Lagarde said in a speech delivered in Lilongwe on 5 January, "but it does not need to walk this road alone."
The IMF granted a three-year $157 million loan to Malawi in July 2012, while international donors, including the United Kingdom, have moved to restore flows of aid. Donor support had dwindled significantly during the final years of former President Bingu wa Mutharika’s administration amid concerns about his increasingly authoritarian rule.