Nankhumwa attributes depreciation of kwacha to MCP four months after DPP rule

By Duncan Mlanjira & Tione Andsen

Opposition Leader Kondwani Nankhumwa told Parliament on Monday that foreign reserves are fast dwindling under the Tonse government than it was under the Democratic Progressive Party (DPP) rule and yet this is just not more than four months into the new government.

This is in stark contrast to the professional observation made by Malawi Chambers of Commerce and Industry (MCCI) chief executive officer, Chancellor Kaferapanjira during the two-day National Development Conference held in Lilongwe last week, who said the kwacha had been stable the past two and a half years to due to donor aid.

Nankhumwa observed that forex is scarce and as the kwacha is depreciating, many Malawians are failing to buy goods and services due to a weaker currency.

He criticized President Chakwera for not adequately addressing this matter in his State of the Nation Address (SONA) in Parliament last Friday, “especially on what measures his administration would put in place to keep the economy ticking”.

But during the panel discussion at the National Development Conference last Thursday, Kaferapanjira revealed that the country was able to import and export goods because it was using donor support to maintain the strong exchange rate of the kwacha during the DDP-led government.

“Malawi kwacha has been stable for a long period at K750 per US dollar,” Kaferapanjira said during the panel discussion.

“The stability of the kwacha was not as a result of domestic production and able to export to other countries but the kwacha was stable due to debt the country was receiving.”

Kaferapanjira, who is the Presidential Chief Economic Advisor, noted that the foreign exchange was not being supported by the production sector of the country’s sector.

“We were making the exchange rate strong from debt aid, which was not necessary making the current account to balance.

“We had a strong exchange rate but we were unable to import goods, as a result the country was not gaining on domestic production to support the country’s production capacity to export more goods.

He had also said manufacturing should help the country to be able to generate foreign exchange which could drive the economy.

He had said the DPP was using the foreign aid was fund consumption and its effects made the kwacha to be strong while the country was  failing to export its products.

In his further response to the SONA, Nankhumwa took cognizance that the current economic scenario is compounded by the COVID-19 pandemic, which has had a profoundly negative impact not only on the Malawi economy but globally such that the world may fall into a recession.

“This is perhaps the reason why GDP growth projections have been revised down to 1.9 percent in 2020 from an initial estimated growth rate of 5.5 percent for the year compared to the 5.0 percent growth rate achieved in 2019.

“Connected to this, let me reiterate my call to Government to seriously consider reducing cooperate tax the private sector pays to Government.

“Due to COVID-19, the private sector is failing to register profits and end up firing employees or put them on half pay. This development has led to accumulative figure of about 400,000 already dismissed from the time Malawi registered its first COVID-19 case in April this year.

“Statistics further indicates that, if this left unchecked, the private sector, shall lay off about a million workers by December this year.”

Nankhumwa also questioned how the government shall fund the huge wish-list that President Chakwera has produced in his SONA without borrowing domestically as well as internationally.

“This is mindful of the fact that domestic borrowing is inflationary and could be a disincentive to investment, which the government needs to create jobs and spur social and economic development.

“This is where fiscal discipline meets political rhetoric and it is not always a pleasant atmosphere,” he said.

Meanwhile, Dr Henry Chingaipe — panelist on governance sector during the National Development Conference — said there was need to develop clear guidelines for non-governmental organizations (NGOs) to account for the funds they are investing in the country.

He said there was a gap within the NGO sector where they are not able to account for what they are offering to Malawian communities in term of development activities.

“The issue of accountability and transparency should cut across all sectors in the country. We are looking at financial resources which need to be account for,” Chingaipe said.