Choice of putting the donor support to good use is upon Malawians themselves—Chakwera

* All his international trips between now and the end of the fiscal year are cancelled — beginning with that for COP28 scheduled at the end of this month

* All public-funded international trips for all public officers at all levels on hold including those in parastatals until the end of the financial year in March

* All Cabinet members currently abroad on public-funded trips to return to Malawi with immediate effect

* Any travel deemed absolutely necessary by anyone during that period must be submitted to my office for my personal authorization

By Duncan Mlanjira

President Lazarus Chakwera has announced new measures t control government expenditure in the wake of being granted the extended credit facility (ECF) by the International Monetary Fund (IMF) as well as expected support from other development partners.

He thus urged Malawians that the choice of putting the international support to good use is in their hands and is not the first time the country has had such a choice because in September 2006, “after two years in office and struggling to make progress economically because of high levels of debt”, former President late Bingu wa Mutharika was given a fresh start when the IMF and the World Bank announced the cancellation of the country’s international debt.

“In the two years that followed, that fresh start was put to good use and Malawi’s economy began to rebound. However, after the elections of 2009, the gains started being squandered, as people developed insatiable appetites for spending on consumption and neglecting to invest in production, including a presidential order to the banks to allow people to cash government checks at commercial banks without any controls.

“The result was Cashgate and the loss of the international budget support we had received in 2006, which we have never gotten back until now. And now that we have successfully restored international confidence and international support, we once again have the opportunity to put it to good use.

“I know that there will be some who will want us to squander this opportunity by spending money carelessly. I will not allow that. I know that there will be some who will want us to squander this opportunity by pointing fingers at me for making the painful corrections that I had already said I’d make three years ago.

“I will not be distracted by that. I know that there will be some who created this mess that I am now cleaning up who will be the loudest in calling me names, claiming that I am the problem, and calling on citizens to attack me. But I am not intimidated by that.

“I am here to serve Malawians, and to do so, I am prepared to do things that are painful as long as they are the right things. The most painful thing by far has been the recent devaluation of our currency to correct the false value of the kwacha based on nothing and rebuild true value in the kwacha based on production of exports.

“I know that this decision has caused a lot of pain, and I know that all of us now have to make big adjustments in spending so that we can prioritize those areas that are most productive and stay the course until our economy becomes productive and profitable again.”

Chakwera pledged that he will lead by example to adhere the “painful adjustments” he has made saying all his international trips between now and the end of the fiscal year are cancelled — beginning with that for COP28 scheduled at the end of this month.

He has also put on hold all public-funded international trips for all public officers at all levels, including those in parastatals, until the end of the financial year in March.

“In fact, all Cabinet members currently abroad on public-funded trips must return to Malawi with immediate effect,” he ordered. “Any travel deemed absolutely necessary by anyone during that period must be submitted to my office for my personal authorization.”

Fuel entitlements for Cabinet Ministers, principal secretaries, directors and all members of senior management of public institutions have been  cut in half with immediate effect and he also ordered the Secretary to the President & Cabinet “to circulate to all public institutions a criteria for local trainings and local travel that will be acceptable, as well as a cap on how much of their budgets can be spent on allowances for such trainings and trips”.

“By doing this, I am effectively ending the practice of draining public coffers to spend on allowances for useless activities,” he said, adding that he has also directed the Minister of Finance & Economic Affairs to include provisions in the upcoming midyear budget review for cushioning small to medium enterprises (SMEs) to “protect the jobs that they create”.

He has also ordered Finance Minister Simplex Chithyola Banda to also include in that mid-year budget review provisions for a reasonable wage increase for civil servants and to also review the pay-as-you-earn (PAYE) income tax and incorporate a reduced percentage in the new budget he will present to Parliament “o that workers whose incomes have lost value in the devaluation are helped with a lower tax burden”.

“In the meantime, to protect Malawians from the predatory behaviours of those who want to exploit consumers in the wake of the devaluation, I have tasked the Ministers of Finance & Trade to work together with the Competition & Fair Trading Commission to investigate all price increases for any sign of unfair business practices and to give me a weekly report on the culprits we need to hold accountable for raising prices in violation of the law.

“Similarly, I have ordered the Secretary to the President & Cabinet to see to it that the recent hiking of the price of water by Waterboards is absorbed by the operating costs of those boards for now, and not placed on Malawian consumers.

Most importantly, the savings we will make from these and other spending cuts will go towards the procurement of food and fertilizer to ensure that no Malawian family in any district is left without food in the next four months while we plant our fields.

“Lastly, as for those who are in positions of leadership and who know that they are responsible for creating the mess we are in, all I can say to them is that I will deal with you soon enough,” he warned.

On Monday, Minister Chithyola Banda said government is putting up water-tight legal and regulatory frameworks that protect the country’s economy — that include intensifying the crackdown on all illegal foreign exchange trade in all markets across the country and in boarder areas.

At a press conference in Lilongwe that was called to update Malawians the Action Plan in the aftermath of the devaluation of the Kwacha, Chithyola Banda said as measures to create water-tight legislations that would deter those that would like to play around with the  economy the Fiscal Police — with support from the Financial Intelligence Agency (FIA) and National Intelligence Service including Malawi Defence Force (MDF) — will intensify crackdown on all illegal foreign exchange trade in all markets across the country and in boarder areas.

“The public is, therefore, warned to resist and report all suspicious incidents of buying or selling of foreign exchange from unregistered vendors. Any individual or entity caught engaging in this business without proper registration and authorization will be arrested, prosecuted, and have their foreign exchange impounded according to law.”

He reminded the general public that dealing in foreign exchange without authorization or licence from the Reserve Bank of Malawi is illegal under the Exchange Control Act, 1984.

In his analysis soon after the devaluation of the kwacha, Chifipa ‘Chifi’ Mhango, Chief Economist for South Africa’s Don Consultancy Group advised the Government “to pay strong attention to the fiscal expenditure, the debt levels and how government loans are utilised; and alleged corruption within government — “especially where the payments are externalized in foreign currency”.

He expressed great concern on the “worrying expenditure patterns on the part of the government, giving an example of where the period between 2015 to 2022 that the total expenditure was MK11.8 trillion with total revenue collected at MK9.1 trillion, thus a deficit of MK2.7 trillion — as according to data sourced through the Reserve Bank of Malawi (RBM).

“What is staggering is that from the total expenditure of MK11.8 trillion during this entire period, only 17.8% was spent towards development of the country,” he said, adding that 82.2% of government expenditure in that period was used for regular payments and expenses required to run a country, which includes all fees, exclusive of capital forms of payment, and does not result in acquiring fixed assets.

“A list of examples of recurrent expenditure include salaries, wages, employee allowances, operational costs like water bills, electricity, accommodation, traveling, telephone, cost of maintaining equipment, and installation, funds used in covering costs of compulsory obligations, debts, price of remunerations, subsidies transfer among other services inclusive of payments on goods and services.”

Mhango added that any government or business operating under such an environment “can never be successful, and to add salt to the wound, in 2022 alone, Malawi Government reached a record high in its total expenditure to MK2.7 trillion, with recurrent expenditure record of MK2.3 trillion, to which development expenditure was only 14% at MK394 billion” — as reflected in data sourced through RBM.

“Unfortunately for Malawi, the trend towards excessive spending, to which the large share is on recurrent expenditure, and less expenditure towards development as well as a narrow revenue, continued in the period in the period January to August 2023.

“Government expenditure was at almost MK2.1 trillion, recurrent expenditure at almost MK1.7 trillion — that’s 82.8% of total expenditure, with only MK352.2 billion in total towards development expenditure; thus only 17.2%, and Government deficit of MK392.7 billion,” he observed.