From Joseph Mwanamveka
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 The Tonse Government 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.
The fact of the matter is that the DPP led government managed the economy very well and this is on record, and that empirical statistics and evidence is available to confirm this fact. All macroeconomic fundamentals were stable and on a decline trajectory. Inflations dropped from 30% to a single digit, inflation also dropped from over 30% to an average of 12% and exchange rate remained stable for over three years. Import cover hovered between 4 to 6 months from less than a month when we took over in 2014. In all this summed up in improving peoples per capital income and well-being of Malawians.
BELOW ARE MATERIAL FACTS WHY MALAWI IS FACING SHORTAGE OF FOREX UNDER THE TONSE ALLIANCE ADMINISTRATION
1. Increase of AIP beneficiaries from 900,000 (90,000 MT) to 4,700, 000 (470,000MT) translating a whooping and astronomical jump of importation of fertilizer importation bill to 160 Billion Kwacha this translates to an increase of the country’s fertilizer import bill from $46 million to $213 million.
2. Cancellation of IMF’s Extended Credit Facility by Tonse Administration which led Malawi to lose $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 a seamless transition into a new programme. Malawians would want to know that this programme as the end of our 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…….)”.
3. Failure to negotiate with local cooking oil manufacturers and resultant issuance of importation licenses for cooking oil to many players meant a lot of foreign exchange leaving the country hence exporting jobs elsewhere and depleting our meagre foreign exchange reserves. Further to this, we understand that now Tonse administration wants to give more fuel importation licenses which may deplete further our foreign exchange reserves. Really, should DPP be blamed for this?
4. Unfavorable tobacco and other export proceeds. You may be aware recently Malawi as a country failed to realize good returns on tobacco which happens to be our main forex earner and cotton proceeds have not been good either. This means that Malawi failed to realize US dollars which could have been used to cushion foreign exchange reserves as it has been in the past hence contributing to the scarcity of the foreign exchange.
5. Government decision to be importing fuel on CIF (Cost of fuel+ Insurance + Freight) thus government paying to the suppliers for fuel, insurance and freight in US dollars instead of buying fuel only in US dollars and arrange the insurance and freight locally which will be paid in Malawi kwacha. Basically, instead of using local transporters and insurers, we are now exporting jobs to foreigners.
6. Crude oil globally jumped from around $60 per barrel in 2019 to about $123 in 2022 thereby doubling our fuel import bill. Malawians may wish to know that the demand for fuel in Malawi is inelastic hence the demand for fuel is not affected by the increase in price.
From the forgoing, it is surprising that the Tonse administration would like to always blame the DPP for mess that 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 facility with the TDB and AFRI-EXIM-BANK forgetting that they called the same institutions as money launderers.
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 but have not succeeded. Now, they have resorted to travel to Badea-Saudi Arabia for the same. We know that should they fail to negotiate in Saudi Arabia they will again, as usual blame the DPP and the son of Chiradzulu Joseph Mathyola Mwanamvekha as a cause of their failure.
FACT: Hon Joseph Mwanamvekha was a Minister of Finance from July, 2019 to May, 2020.