An African proverb admonishes that “if your fingers are in somebody’s mouth, you don’t hit him on the head”. But don’t tell that to Malawi’s president, Bingu wa Mutharika. His country is ever dependent on foreign aid, especially from the West, but he says Western donors can “go to hell” if they want cooperation on “a wise-person-and-an-idiot basis. I will not accept that! We are all wise people.”
Malawi’s President, Bingu Wa Mutharika, has lost his cool with the pressure which the country’s Western donor partners are exerting on his government. The donors, including the IMF and World Bank, are pushing Mutharika to follow “fiscal discipline” which they say will help heal the country’s ailing economy.
Malawi is currently facing a fuel crisis, and a shortage of foreign exchange. This, critics say, largely stems from President Mutharika’s refusal to devalue the local currency, the Kwacha, which is among IMF conditionalities for the resumption of Extended Credit Facility (ECF) to Malawi.
The IMF suspended the ECF programme last year because it claimed Malawi had failed to adhere to conditions attached to the Facility. An IMF technical team that visited Malawi last December said in a report issued after their mission that Malawi should devalue its local currency by at least 40 per cent so that the official rate could catch up with the parallel market’s.
The country’s commercial banks are trading the kwacha at an official rate of MK167 to US$1 while the parallel market is at MK300 to US$1, a development that has brought about an acute shortage of foreign currency, which is negatively affecting business operations in the country.
But President Mutharika has maintained that he will not bow to the donor pressure, saying the repercussions of such a hefty devaluation would be harsh on ordinary Malawians.
He cites last year’s 10% devaluation of the kwacha, which again was forced on him by the donor partners, saying it resulted in a sharp increase of prices of goods and services.
In a public address at a rally held in early March, Mutharika took a swipe at the IMF’s interference in Malawi, and accused the organisation of hindering him from finding a lasting solution to the foreign exchange problem in the country. He said he knew the problems causing the forex shortage more than the IMF would ever know.
“But they [IMF officials] are just arrogant, undermining what a black man can do. They think that because they are Westerners they know everything,” Mutharika charged.
The president also accused the donors of funding civil society organisations to hold demonstrations against his government. He therefore asked his ruling Democratic Progressive Party (DPP) supporters “to foil these plans so that they will not happen”.
“If donors are going to criticise [it], saying this is [not] democracy, to hell with you. I have had enough. If any donor wants to withdraw from this country, let them leave and go,” a clearly exasperated Mutharika thundered!
The president’s harsh comments coincided with the visit of a World Bank delegation led by Marcelo Giugale, its African regional director of economic management. The delegation was in the country to propose a “comprehensive package” to help bail out the economy.
But Mutharika said the delegation should not expect him to take their advice wholesale. Rather they should align their bailout programme with the country’s plan. Otherwise, “I will not accept them at all. I want to make this clear. I will not accept every programme they will make. If they want cooperation, let us not cooperate on a wise-person-and an-idiot basis. I will not accept that! We are all wise people,” Mutharika, who is also an accomplished economist, retorted.
He asked the donors to leave him alone to address the economic challenges facing the country. “I can assure them that I can fix the forex problem on my own if the IMF leave me alone and let me employ my policies without disturbing me. I can fix the forex problems in 12 months!”
This was the second time this year that Mutharika had asked the donor community to give him time to address the economic issues in the country. During the opening of the parliamentary session in February, the president asked for three more years to address the economic challenges facing the country.
So far neither the IMF nor the World Bank has openly reacted to Mutharika’s outbursts. But reports indicate that the president’s attack on donors could lose the country a large chunk of the foreign aid that has traditionally sustained Malawi over the years.
The local daily, Nation, quoted an anonymous senior diplomat in the Malawian capital, Lilongwe, as saying that the country currently needed a bailout of about US$500m to overcome the economic problems besetting it.
“But with such remarks, I see our readiness to assist diminishing and the country is slowly sliding into another Greek scenario where it will not be able to pay its creditors in the coming months,” the senior diplomat allegedly said.
Malawi has been hit, since last year, by a foreign aid freeze which accounts for 40% of the national budget after some donors withdrew their support due to concerns about poor economic policies and bad governance.
Finance Minister Ken Lipenga recently told parliament that the country was facing a $121m budget shortfall largely due to a suspension of the IMF’s aid programme.
Bad blood between Mutharika and donor partners reached a crescendo last year when the government deported Fergus
Cochrane-Dyet, the British high commissioner to Malawi, over a leaked cable to London in which the envoy described Mutharika’s behaviour as combative and self-centered.
This resulted in some donors withdrawing their budget support. But Mutharika went on to introduce the country’s first-ever “zero-deficit” national budget for 2011-2012, which largely relies on locally generated income.
Civil society organisations and political analysts have warned that Mutharika’s outbursts will lead to more donor apathy in a country in dire need of donor support.
Commentators believe that Mutharika’s newfound strength when dealing with Western donors comes from his new relations with China, after unceremoniously ending a 41-year-old diplomatic relationship with Taiwan.
From the time the two countries established diplomatic ties in December 2007, China has been funding ambitious projects in Malawi. For example, the Malawian Parliament now operates from a new $41m building, built by the Chinese, which was opened in June 2010. China is also constructing a university of science and technology in Thyolo district which is expected to be completed in two years’ time. The Chinese ambassador to Malawi, Pan Hejun, said recently that the university, which will accommodate more than 3,000 students with advanced facilities, would be one of the best in Southern Africa.
Chinese companies are also building a secondary school in Thyolo, and a 100-km road between the northern districts of Karonga and Chitipa.
China has also promised to build a China-Africa Friendship School in Lilongwe, establish solar and biogas pilot projects, and set up an agricultural technology demonstration centre.
President Mutharika has said that he is satisfied with his government’s relations with China because “Chinese projects come with no strings attached”.