...No, Economy not doing enough to lift the spirits of Malawians says Rhodrick Junaid Kalumpha - UK-based Social and Economic commentator
...Yes, it is for quick economic gains says Atupele Muluzi - Minister of Economic Planning and Development
...No, Economy not doing enough to lift the spirits of Malawians
The Malawi Economic Recovery Plan as announced by the Government a few weeks ago, offers very little or no hope at all in its present form.
Unless we as a nation pull together with proper guidance and direction from the government, the economic woes that have blighted us since early 2009 will continue for the foreseeable future.
April 2012, though a sad month as we had lost a sitting president, offered a beacon of light in terms of economic change as we were provided with an opportunity to start afresh.
Indeed this momentous diktat came as a great beacon light of hope to millions of Malawians who had been parched in the jaws of contemptuous injustice both economically and socially for almost three years under the previous regime.
However, almost 6 months down the line, much as we have made commendable strides in various social-economic factors such as provision of forex, fuel and improvement on human rights, other crucial sectors of the economy are sliding back at breakneck speed.
Today Malawians are still struggling to make ends meet and their state is worsening as the months go by. The confidence and hope that the month of April presented to Malawians is slowly waning and turning into destitution.
Confidence, termed as "animal spirits" in economics by the renowned economist John Maynard Keynes, is a very essential component of economic prosperity and development for any economy and Malawi cannot afford to lose this.
Keynes, writing in his 1936 book titled "The General Theory of Employment, Interest and Money" stated thus: "Our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as the result of animal spirits – a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities".
Recently in 2009, acclaimed economists George Akerlof and Robert Shiller in their book "Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism" reaffirm the necessity of an active government role in economic policymaking by rediscovering the idea of animal spirits.
Like Keynes, these contemporary economists believe that managing these animal spirits requires the steady hand of government. In the book, they detail the most pervasive effects of animal spirits in modern economic life namely confidence, fear, bad faith, corruption, and a concern for fairness.
Unfortunately, these are the tenets that are becoming prevalent in current economic setup in Malawi. Confidence in the economy is fast eroding among both businesses and the public at large. Due to high levels of unemployment and increasing strikes, there is fear among workers of losing their jobs.
Bad faith between employees and employers are resulting into strikes or talks of strikes in almost all Government statutory corporations.
Corruption in Government is still rampant where merit on board appointments and contract awards is lacking, thus leading to concerns for fairness.
Consequently, the "animal spirits" among us Malawians is very low hence very dangerous for our ailing thin economy.
The picture becomes even gloomier when we look at few but very crucial macroeconomic indicators. Month on month headline inflation, as reported by the National Statistical Office (NSO), rose by 3.8% from 21.7% in July to 25.5% in August.
This comes barely a few months after interest rates jumped from the mid 20% basis points to the mid 30% basis points. Worse still, all these are coming hot on the heels of a 49% devaluation of the Malawi Kwacha.
Results from a survey by the Centre for Social Concern, as reported in the Daily Times of 20th September, indicated that the basic needs basket survey for August showed that Blantyre became the expensive city as a family of six required K81,363 to survive seconded by Lilongwe at K79,286, Mzuzu K71,798 and Zomba at K66,787 against an average of K53,453.00 the same period last year.
These grim statistics accentuate the loss of the "animal spirits" among Malawians. Therefore it can be said that the Economic Recovery Plan is not doing enough to lift the spirits of Malawians. Rather, it is dampening the mood among businesses and the general populace.
The Government needs to seriously look into this and restructure the plan before all hope is lost. The plan must be more clear, robust and most importantly, communicated to the general public so that they are aware of what is being done to change their dismal economic condition.
The plan must engage all corners of society and draw every Malawian into it so that they feel that we are in this together. Otherwise business as usual will further plunge everyone but a few into untold poverty and misery.
...Yes, it is for quick economic gains
The Malawi Economic Recovery Plan (ERP) has been developed for quick economic gains after macro-economic indicators were not favourable during the first year of implementing the MGDS overaching medium term strategy for Malawi (2011-2016).
There was a slowdown in GDP growth which was compounded by forex and fuel shortages.
The ERP has been enriched by the National Duialogue on the Economy held in Mangochi from June 29-July 1.
The plan proposes immediate policy reforms (within 3 months); short term policy reforms (within 1 year) and medium term policy reforms (2-5 years).
It also proposes increasing resource allocation to areas that would produce quick gains and to areas that address contraints to economic growth.
The Immediate Policy Reforms included the adjustment in May of the exchange rate from an average of K167 to K250 to a doalr and the adoption of the flaoting exchange rate regime.
On fuel pricing, the government retuyrned to the automatic fuel pricing mechanism which was intended to eliminate deficits in the Price Stabilisation Fund and to reduce pressure on the budget.
On Monetary Policy, the government ,institutionalised monetary policy to ensure less expansionary policy and foster price stability, including the mopping up of excess liquidity by among other means, adjusting interest rates.
The ERP also involves the social support package to mitigate unintended negative socio-economic impacts of reforms on the population, implementing social cash transfer programmes, upscaling farm input subsidy programme (FISP), contiunuing school meals programme and upscaling of labour intensive public works programme.
The Fiscal policy is aimed at prioritising expenditures to sectors that would enhance economic growth, create employment and boost production and diversification for export.
The rational for sectoral choices in the ERP are the need to to ensure rapid economic growth for poverty eradication, focus on what is constraining growth (energy, transport and forex shortage).
The plan therefore focuses on energy, tourism, mining, agriculture, transport and information communication technology.
On energy, the main objective is to generate and distribute sufficient amounts of energy, while on tourism is to develop Malawi into a a amjor tourist detsination.
On mining, the aim is to derive maximum potential by increasing production and value addition, while agriculture is to diversify and focus on commercilaisation for export market.
We are confident that once the plan is fully implemented, jobs should be created in the economy.
The Government understands that for the economy to stabilise, there is need to bring back inflation rate to single digit, reduce interest rates, improve liquidity challenges among commercial banks and also cushion Malawians from the unintended rsult of economic reforms.
The ERP is participatory and will help sharpen the whole process of stablising the economy.
The ERP is just to ramp up ongoing efforts within the annual budget and the Malawi Growth and Development strategy (MGDS) to stabilise the economy and cushion Malawians from the effects of the past 20 months.