Chakwera administration very much lost with no clear turnaround strategy

EDC3D6A6-77BD-47DF-8072-0DCF4EAE79B0.jpeg

Chakwera - leadership malnutrition

CAT THE CHAFF (Ephraim Munthali- NPL) –When President Dr Lazarus Chakwera’s Tonse-led administration assumed power after the court-ordered fresh presidential elections last year, it was clear to every economic observer and those who cared to read and listen that there were several risks to the economy that could append the fledgling government’s agenda.

The first risk was the coronavirus pandemic pandemic that by June last year had already affected hundreds and claimed scores of lives. The immediate risk here was, of course, to the National Budget, starting with the health spending plan that would need more money to buy medical supplies, the bulk of which were not in the annual procurement plans.

It was also clear that sectors such as security, education and others involved in the enforcement of Covid-19 measures to mitigate the spread and effects of the pandemic, including the poor and small businesses, would destabilise the whole government spending assumptions.

Travel restrictions and social distancing preventive measures would mean that the workforce and companies would be producing less and, therefore, selling less to the extent that the Malawi Revenue Authority (MRA) would be collecting less money to finance a national budget whose expenditure would be forced to rise amid the pandemic and a donor community too untrusting to help with budgetary support.

The Tonse Alliance, which was in opposition when the virus started, was watching on the sidelines gleefully as the Peter Mutharika-led Democratic Progressive Party (DPP) administration struggled with the response.

But at least Mutharika had a plan he could point at for combating the virus and to his credit largely contained the pandemic.

Chakwera came without a plan for combating the virus and by his own admission, was complicit in its spread.

They knew the virus posed a fatal risk to the economy, but were too busy enjoying their 15 minutes of fame after winning the presidential vote to worry about a response plan.

Tonse’ lack of foresight was astounding.

By the time they cobbled a plan, hundreds, including Cabinet Ministers and other prominent leaders had succumbed to the disease. Those snores on the job are hurting the economy now although the numbers have dropped sharply in recent months.

The second obvious risk was the high public debt levels that Tonse inherited, which have been galloping towards unsustainable levels.

But instead of coming up with a sound plan for reigning in on debt, the new administration created the largest fiscal deficit in the country’s history and went on a borrowing and spending frenzy, thereby creating a future obligation for the government to repay the debt and interest on loans that are largely not being spent on productive endeavours with potential for triggering multiplier effects, which can create the wealth needed to retire the piling debts.

Other pressure points included the depreciation of the kwacha as demand surpassed supply amid high importation costs of fuel, medical supplies related to Covid-19 as well as an expansive and expensive Affordable Inputs Programme (AIP).

Depressed export earnings due to a crippled international transport system thanks to Covid-19 would further weaken an already narrow export base. And with Covid-19 preventive measures that also affected projects implementation, foreign exchange inflows in international organizations operating in Malawi—including those that receive off-budget support from development partners—shrunk and will remain low for the foreseeable future.

Given the above, it should have been clear that the kwacha would dishevel in the short-to medium-term. The point is that the Tonse administration should have seen this economic tsunami coming.

Maybe they did see it approaching, but Finance Minister Felix Mlusu’s maiden National Budget presented in the last quarter of 2020 did not give confidence that they seriously looked at the risks and devised a plan around the risks.

Chakwera – no sign of plan

Maybe they could have been forgiven for the initial lack of foresight having been out of government for too long, especially Mlusu who had been a private sector hand throughout his life and had yet to master Treasury’s role in giving actionable meaning to public policy.

But I have looked at the Mid-year Budget and all I see is an administration very much lost with no clear turnaround strategy.

We have a health crisis on top of an economic crisis, yet the markets, including firms and households have no idea which way the country is heading. That is really a dangerous place to be.

Leave a Reply

Your email address will not be published. Required fields are marked *

scroll to top