Former Reserve Bank of Malawi (RBM) Governor Dr. Dalitso Kabambe has warned that if President Lazarus Chakwera Tonse Alliance administration fails to manage debts, fiscal and monetary policies, Malawi will go bankrupt by 2025.
Dr. Kabambe told Times TV Exclusive Interview on Saturday, September 2, 2023, that Chakwera’s Tonse leadership must make hard economic decisions, including reducing the labor force in public service, and local and international travels, among others.
The former RBM Governor hinted that “Malawi economy is suffering from three major serious fatal cancers that need correcting urgently, and if nothing is done quickly, this patient, the Malawi economy, will completely collapse.
“The three cancers are the fiscal cancer, the monetary cancer, and the exchange rate cancer. Everything we are experiencing today in our economy is a result of these three cancers”.
Kabambe observes, “the soaring inflation from a single digit of 7 percent in 2019 to 29 percent to date; the depreciation of the Malawi kwacha from MK732 per US dollar to MK1,090 on the official market and MK1,900 at the parallel market; the jump in Interest rates from 13 percent in 2019 to 24 percent to-date; the rundown in official foreign exchange reserves from 6 months of import cover in 2019 to 1-month import cover today; the rise in public debts from MK4.3 trillion in 2020 to MK8.4 trillion now”.
He added, “The rise in basic commodities such as fertilizer from MK18,000 per 50 kg bag in 2019 to MK75,000 now, maize price from MK6,500 per 50 kg bag in 2019 to MK50,000 in some markets today, running down of grain reserves, shortages of foreign exchange reserves, running down on fuel reserves plus the return of fuel queues today; collapse of the job market and all the job losses underway now.
“Simply put, the economy is seriously sick and everybody is caught up in this fever, rich or poor, rural or urban, employed or unemployed, Christian or Muslim, young or old, no one is spared. Malawians are suffering, and the amount of pain is simply excruciating”.
On suicidal or self-inflicted poisonous fiscal policy and how that is related to this fiscal cancer, Dr. Kabambe said, “Since 2020, the Tonse Alliance has been implementing an expansionary fiscal policy, characterized by heavy domestic borrowing from the banking sector. This has led to budget deficits exceeding 7-8 percent of GDP, with K813 billion borrowed in 2020/21, K825 billion in 2021/22, K1.2 trillion in 2022/23, and K1.3 trillion in 2023/24, resulting in a total public debt of K4.1 trillion.
“By the next General elections in 2025, public debt will be in excess of K10 trillion, with over K6 trillion accumulated in five years of the Tonse Alliance Administration. This excessive public debt not only entails huge servicing costs but also crowds out the private sector from the credit market, impairing their ability to produce more output and create jobs. Additionally, this has led to currency depreciation and shortages of foreign exchange, as 60% of government expenditure is spent on imported items. Injection of borrowed money into the economy has impaired monetary policy and led to soaring inflation”.
He observes further, “The fiscal cancer in Malawi needs immediate correction to improve monetary and exchange rate policies. The Tonse Alliance Government has 25 months until the next General elections and the next budget is an elections budget. Cutting the budget would require reducing cabinet ministers, advisors, travel, salaries, diplomats, public service, procurements, and the Affordable Input Subsidy Program.
“These measures are difficult to implement during a general election. The Tonse Alliance must decide whether to continue deep austerity measures to save the economy or focus on winning the 2025 elections. The correction will take 18-24 months, and delay would continue to worsen the situation for Malawians”.
On the allegation that he doctored Net International Reserves (NIR) figures for the International Monetary Fund (IMF), Kabambe hinted that the MK300 million Ernest and Young (EY) Forensic Audit Report has cleared him.
“This has been the Malawi Congress Party (MCP) narrative that I cooked up figures. I was even arrested on mere speculations. Now that EY has not mentioned me or any of the accused persons in the allegations, what will the Tonse government say? So, now that the matter is in court, we will see how they will deal with it there.
“Chakwera’s Tonse government might try to arrest us, but the God in heaven vindicate us to become victors on what this leadership has messed up,” dares Kabambe.
Dr. Kabambe is one of the opposition Democratic Progressive Party (DPP) Presidential aspirants for the 2025 polls.
-maravipost