We are fixing a battered economy


We are fixing a battered economy

Peter Mutharika was elected as President of Malawi four years ago and inherited a “tattered and bankrupt economy” from his predecessor, Joyce Banda. Since then he has been engaged in repairing the damage. He tells reGina Jane Jere how he has reversed many of the economic woes and is setting his country, which is celebrating 54 years of independence next month, on a path of sustainable growth.

The election of Peter Mutharika as President of Malawi in 2014 was not a quiet affair for a country renowned for its political docility. The argument over the credibility of his presidential candidacy – which some critics saw as a dynastic take-over from his elder brother, President Bingu wa Mutharika, who had died in office two years earlier – still shapes debate in the country and further afield today.

But the fact is that in those elections, he defeated the then caretaker President Joyce Banda – who was mired in a corruption scandal of unprecedented scale – into third place.  

It is however, the extent of and the effects of Joyce Banda’s so- called cashgate scandal, and how the new Mutharika government has handled and resolved it in the past 4 years, that is defining his rule, as he sets up for a likely second term in office come 2019.

“My government came into power just after the former President’s cashgate,” he says when I interview him during the Commonwealth Heads of Government Meeting in London.

 “When we came in, there was absolutely no money. The country was literally bankrupt. The deficit the previous government left was as huge as the national budget; the arrears were in billions, both local and international. To top it all, donors who were providing 40% of our budget left us,” he says.

Fixing what he calls a ‘tattered economy’ and winning back donor confidence has been one of Mutharika’s priorities, but it has not been easy; it has been compounded further by natural calamities that beset the country as soon as he took office.

“Just after six months in office, we had the worst floods Malawi has ever experienced. A third of the country was completely swept away, and we had to divert the little resources we had to rebuilding the affected regions, and resettling people. 

“But as if that was not enough,” he reflects, “a year later we had famine – the worst ever in the country’s history – and it ran for two consecutive years. We became completely food-insecure, and we had to find ways of feeding over 4.5m people who were food-insecure,” he laments.

“I promised people in those difficult times that nobody was going to die of hunger. We worked extremely hard and we managed to contain the famine, and now this year, things are much better, although we may still have a deficit of maybe 30%,” he adds.

His voice drops lower when he describes the fiscal situation he found the country in following his election: “When I came in, we found only one month’s worth of import cover – the lowest in the history of our country.

“Now we have six months of import cover, the highest in history. We now have over $1bn in reserve – $600m official reserves and $400m private.” 

He says that inflation, which had been running at 37%, has now been beaten down to only 7.8%; interest rates of about 40% have been brought down to 16% policy rate and about 21% commercial rate.

“Of course I would still like these figures to go further down, that is the aim. But we are still much better off than where we began. And during this time, the kwacha has been stable for over two years, and I have not raised the price of petrol for two years too – something that has never happened before.”

Fiscal spending cutbacks

Filling the financial black hole he inherited gives him a sense of pride. He gives further details with zeal: “Although we had this very bad economic scenario, we still had to set our targets on how were going to rebuild the economy. One of the major decisions I took was to cut down on spending: one way to do so was to cut back on ministers travelling abroad for meetings. I myself do not travel; the last time I did [before the CHOGM] was to attend the UN General Assembly in New York last September. 

“I also decided to have a lean Cabinet – reducing it from a Cabinet of 30-40 people to only 18 ministers, 20 if you include the President and Vice-President. By doing so we have managed to save large amounts.” 

He expands on the subject: “Even unnecessary internal travel has been cut back. For example, if I am visiting a project, not everyone has to travel with me, unless they are a line minister. For example if I am launching an agriculture project, only the Minister of Agriculture has to come, we do not need the Minister of Labour to come too, or the Minister of Foreign Affairs or Education. 

“Through these cut-backs and prudent spending, we have managed to finance our budget ourselves. This year for example, 90% of our budget is being funded from our own domestic resources. We are not getting donor support to fund our budget.”

He says the economy has now stabilised, and is beginning to grow. “When we came in, it was growing at 2.7%, and although we still have to have the final figures, this year the economy is expected to grow at around 4 to 5.5%,” he says. “I am hoping that in a year or two, we should be able to grow at 7 to 7.5%. So yes, the economy is beginning to improve and this has taken discipline and a strict and tight monetary policy. The opposition of course may not agree, but the truth of the matter is that these are facts, and we can prove them.”

These prudent fiscal measures appear to have also warmed the hearts of the donor community, who have since returned to Malawi. In April, the IMF approved a new three-year Extended Credit Facility for Malawi to the tune of $112.3m.

The Fund’s Deputy Managing Director, Tao Zhang has given Malawi the thumbs up, but with a note of caution: “Malawi has shown progress in achieving macroeconomic stabilisation following two years of drought, with a rebound in growth and inflation reduced to single digits… However, the fiscal position has deteriorated and the public debt to GDP ratio has risen…The authorities are [however] making efforts to entrench macroeconomic stability, raise growth and reduce poverty.”

Africa must industrialise

But breaking the poverty cycle, says Mutharika, is not a one-man show. It is both a national and regional collective responsibility, and needs the involvement of private investors and institutional collaboration. Here the Malawian leader is quick to point out why his country was one of the African countries that welcomed and signed up to all the three protocols of the recently launched Africa Continental Free Trade Area (AfCFTA). 

However, despite his pragmatism on the need for the new economic bloc, Mutharika is cautious on how Malawi (and other African signatories) will make the most of the AfCFTA:

“It is important that Africa has conceived the Common Market and we can have as many common markets as we want – but in order to benefit and take advantage of it and make it work for our people, countries must have something to sell. That is why for me, the emphasis must be on industrialisation,” he stresses.

“Malawi is a small market of 17m people, and it is important to be part of this common market. By having a larger market we will of course attract investors, but if you are not manufacturing anything, they won’t be interested. Investors know that in the rest of the world, return on investment is about 8%; in Africa it is around 30%. The labour is there, resources are there, and it is therefore very profitable to invest in Africa. But they will not invest without the right conditions.”

 So the key now for Africa, he argues, is industrialisation – especially in agriculture. Whatever the produce, lentils, ground nuts, soya beans, all have to be industrially processed. “But without industrialising, we will not attract investment,” he points out.

 He also emphasises the need for value addition to African produce and in manufacturing. “That is what we are trying to do in Malawi, and that is what I will aim for,” he promises.

One of the major constraints on industrialisation, he says, is the perennial problem of having an adequate power supply and the over-reliance on hydropower across most parts of the continent.

“Lake Malawi’s levels have gone down and we can now only pump out less than 50% [of the power capacity]. The situation is made worse because Malawi has only invested in hydro power for all these years,” he says.

“Can you believe that since independence in 1964, we have only added 131 megawatts of power? We have never projected the future of energy demands to cater for the growth of our populations and the needs of industrialisation.”

Africa must change that, and he says it will only happen if there is political will and major investments in new forms of energy, such as nuclear, coal-driven or fossil.

Term limits crucial

But achieving excellent economic and financial results only comes with good governance, he says, adding that term limits are crucial to moving Africa forward.

“I am a lawyer by profession and was involved in the drafting of my country’s Constitution, so I very much respect the rule of law and yes, I am very much in support of political term limits, there is no doubt about that,” he says. 

Former President Joyce Banda has since returned to Malawi after a four-year self-imposed exile and indirectly, from this interview, President Mutharika seems to be ensuring her return is safe.

“Good governance is crucial and as President I also have no intention of curtailing anyone’s freedom and arresting people arbitrarily, as long as they respect the rule of law and remain non-violent – even as we lead up to the next elections, during which we are expecting to get a landslide victory. 

“It will give us the mandate to finish all the work we are putting in place for Malawi to excel,” he stresses.  NA


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Written by Regina Jane Jere

reGina Jane Jere is a Zambian-born London-based journalist and founding Editor of the New African Woman magazine the sister-publication of the New African magazine of which she was the Deputy Editor for over a decade. The mother of two juggles a wide-range of editorial and managerial duties, but she has particular passion on women’s health, education, rights and empowerment. She is also a former Zambian correspondent for Agence France Presse, and a former Africa Researcher at Index on Censorship. She writes extensively on a wide range of issues, from politics to women’s rights, media and free speech to beauty and fashion.

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