For Immediate Release
15th September, 2022
STATEMENT ON THE CURRENT SHORTAGE OF FOREIGN EXCHANGE IN MALAWI
There have been a lot of misreporting and misinformation on current shortages of forex in Malawi and the Tonse Alliance government, in many instances, has resorted to blaming the DPP Administration. It has always been my wish not to comment on such issues because our President His Excellency Prof Arthur Peter Mutharika advised us not to interfere on how this government is managing the economy and foreign exchange. However, we have always been available to provide technical expertise should the Tonse Government require our advice, after all we are Malawians and if Malawi sinks we will all sink.
The fact of the matter is that the DPP led government managed the economy very well and this is on record, and empirical statistics and evidence is available to confirm this fact. All macroeconomic fundamentals were stable and on a decline trajectory. Inflations dropped from over 35% to a single digit, interest rates also dropped from over 30% to an average of 12% and exchange rate remained stable at K750 per one US Dollars for over three years. Import cover hovered between 4 to 6 months from less than a month when we took over in 2014. in fact at some point during Bingu Wa Mutharika Administration, Malawi was rated as the second fastest growing economy In the world after Qatar. Between 2012 and 2018 during Prof. Arthur Peter Mutharika’s administration, Malawi’s doing business Index improved significantly and Malawi was being considered as one of the favorable destinations for foreign direct investment (refer to World Bank Statistical Bulletin 2014-2018). As a result of the foregoing, Malawians’ per capita income, disposable income and welfare started improving hence reducing poverty.
BELOW ARE MATERIAL FACTS WHY MALAWI IS FACING SHORTAGE OF FOREX UNDER THE TONSE ALLIANCE ADMINISTRATION
- Increase of AIP beneficiaries from 900,000 (90,000 MT) to 4,700, 000 (470,000MT) translating to a whooping and astronomical jump of fertilizer importation bill to 160 Billion Malawi Kwacha translating to an increase of the country’s fertilizer import bill from $46 million to $213 million in US Dollar terms.
- The cancellation of IMF’s Extended Credit Facility by Tonse Administration which led Malawi to the loss of US$ 101 million which was already negotiated by the DPP led government. One would have expected that the Tonse government would have continued with the programme while negotiating a new facility to allow for a seamless transition into a new programme. Malawians would want to know that this programme as the end of DPP’s tenure the programme was on track as observed by the First Deputy Managing Director Mr. David Lipton, and Acting Chair, who stated:
“(Despite large reconstruction and balance of payments needs following Cyclone Idai Malawi’s ECF program performance has been satisfactory. Program-supported structural reforms advanced, addressing several important gaps that had previously been identified in public financial management. All quantitative performance criteria were met)” refer to the IMF.
- The Tonse Alliance’s failure to negotiate with local cooking oil manufacturers and the resultant issuance of importation licenses for cooking oil to many players which meant externalization of a lot of foreign exchange hence exporting jobs elsewhere and depleting our meagre foreign exchange reserves. Further to this, we understand that Tonse administration wants to give more fuel importation licenses which will deplete further our foreign exchange reserves. Really, should DPP be blamed for this?
- Unfavorable tobacco, cotton and other export commodity prices. Malawians may be aware that recently Malawi, as a country failed to realize good returns on tobacco which happens to be our main forex earner. Cotton proceeds have also dwindled significantly during the past few years. This means that Malawi is failing to realize adequate Foreign Exchange which could have been used to cushion our foreign exchange reserves as it has been the case during the DPP administration hence contributing to the scarcity of the foreign exchange.
- Government decision to be importing fuel on CIF (Cost of fuel+ Insurance + Freight) thus government is paying for fuel, freight and insurance to foreign fuel suppliers instead of buying fuel only in foreign currency and arrange insurance and freight locally which would be paid in Malawi kwacha. Basically, instead of creating jobs in Malawi the Tonse Government is exporting jobs to foreign countries, contrary to their much taunted 1 million job creation promise.
- The Increase in world prices for crude oil: Crude oil globally jumped from around $60 per barrel in 2019 to about $123 in 2022 thereby doubling Malawi’’s fuel import bill. Malawians may wish to know that the demand for fuel in Malawi is inelastic meaning that the demand for fuel is not affected by the increase in fuel prices.
7) The frequent and regular foreign trips by the President Dr. Lazarous Chikwere. Malawians would agree with that the frequent and regular foreign trips by the State President are draining the much-needed foreign exchange reserves without corresponding generation of forex from such trips.
From the forgoing, it is surprising that the Tonse administration would like to always blame the DPP for the mess they have created in the last two years. Tonse Alliance has gone further to blame the Democratic Progressive Party (DPP) for their failure to negotiate the new facilities with the Trade Development Bank (TDB) and AFRI-EXIM-BANK forgetting that they called the same institutions as money launderers. The Tonse Government is also blaming TDB and Afri-Exim bank for lending to Malawi at commercial rates. What kind of hypocrisy is that?
As a matter of fact, Malawians may wish to know that the Tonse Government sent a team to Egypt to meet the Afri-exim Bank;!and in Kenya to meet TDB (Trade and Development Bank) to negotiate foreign exchange facilities and the team also went to Mauritius to secure foreign exchange facilities but have not succeeded. Later they travelled to Badea-Saudi Arabia for the same. We know that when they fail to secure the foreign exchange deal in Saudi Arabia they will again and as usual, blame the DPP and the son of Chiradzulu Joseph Mathyola Mwanamvekha as a cause of their failures. What a shame!!
- Fact: Hon Joseph Mathyola Mwanamveka, MP was a Finance Minister for less than a year from July 2019- May 2020.
Joseph Mathyola Mwanamvekha
MP. chiradzulu South Constituency