Onus to respect human rights rests with Malawi government

THE TWISTER BY BRIAN LIGOMEKA

The writing is on the wall. Malawians are discontented with the current administration and its failure to address pertinent issues raised in their July 20 petition. That the people's efforts to hold a peaceful vigil are also being frustrated will only make matters worse.

The poor turnout at the president's whistle-stop tours in various townships punctuated by some ruling party officials being booed at, jeered at are all tale-tell signs that many people are getting fed up with an administration that has lost direction and respect for the people who voted them in power.

The people's demands are straight forward. Malawians will not allow any leader in the current political dispensation to throw away their Constitutional rights. It does not matter that those in power are capable of commandeering the trigger-happy police officers to gun down unarmed protestors in the streets as it happened during the July 20 protests.

The Malawi Human Rights Commission findings have just confirmed what most Malawians already knew that many who died on July 20 died from gun shots. Of the 19 who died, 15 of them died from gun wounds. Everyone knows who was carrying guns on that fateful day – our own police.

Now as people are planning to hold peaceful demonstrations on August 17, the authorities are back at it issuing threats. In his whistle-stop tours, president Mutharika had no kind words for the organizers of the demonstrations. It is quite evident that, Mutharika and his advisors have lost touch with reality. Whether this is because the president is getting bad advice or that he is ignoring good advice, only he knows.

Perhaps, it's time for Mutharika to do some serious soul-searching by asking himself why is it that all of a sudden the peace-loving Malawians who voted for him en masse are suddenly turning their backs on him. Maybe before getting into the streets and making his outbursts during his road shows, he needs to find out how and where he lost the people's confidence.

Why are people just ignoring all the threats and pleas he is making? Mutharika should be asking himself why Malawians are insisting that come what may they are ready to protest their discontent in the streets, when all along they have been regarded as a docile people.

To try and shut the people up or to use the state machinery to intimidate them will only make matters worse. It is primitive politics to think that people can be threatened into submission while their human rights are being trampled upon. In a democracy, leaders only have their legitimacy to rule in as long as they also respect the rule of law and uphold good governance.

If government can just listen and address the concerns of the people, nobody would talk of protesting or holding a vigil. Intead of cherry picking what demands they will respond to, why is government not listening to the petitioners demands and addressing them appropriately, rather than waste time with empty outbursts and threats.

We wonder why it is so difficult for government to just scrap off bad laws like Section 46 of the Penal Code and the Injunction Law. Instead they are busy trying to justify laws that are clearly designed to put Malawians under the yoke of repression.

Those in power need to realize that no amount of belligerence, arrogance, threats and insults will intimidate Malawians from reclaiming good governance which is already theirs by law.

As Malawians wish to be expressing their Constitutional right of peaceful assembly, association and expression, the onus is on the government to ensure that democracy as a system of government works and human rights and the respect of human dignity and freedom is respected. Any attempt by those in power or their agents to prevent the citizenry from expressing their rights as enshrined in the Constitution will only ferment further discontent and fuel more protests and vigils.

Malawi: Economics of a drunk

THE TWISTER

BY BRIAN LIGOMEKA

Once upon a time, The Twister loved to enjoy his favourite beer so much; perhaps much better that one notorious dictator who one day took pleasure of drinking beer with street vendors in a stadium when a stone-throw away, people were mourning the deaths of freedom fighters.

In those olden days, The Twister would spend K50,000 on expensive beer in an up-market bar at  night and start regretting the following morning. His groaning over his impecuniousness never helped him in any way. It was economics of a drunk. In economics of a drunk, a dipsomaniac becomes wiser when he is totally broke after spending all his monies on alcohol - not with street vendors in a stadium-  but rather with pretty damsels  in an exclusive bar.

While The Twister dropped the habit years ago, it seems some policy makers practise economics of a drunk to the fullest. This week’s devaluation of the kwacha is more or less the application of economics of a drunk.

 Let me twist the mater in this way. While President Bingu wa Mutharika’s economic policies previously were swinging from the foundations of Keynesian principles on one end to those of monetarist philosophies on the other end, his intractable obsession for one or two assumptions of monetarist theory has attracted lots of criticisms with other economist failing to predict where he is leading this country to in terms of economic destination.

His previous resilient stand on the value of the Kwacha that it should not be devalued despite frantic admonition from different economists and the International Monetary Fund portrayed him as a cunning student of monetarist theory who incontestably believe that monetary policy should be firmly manipulated as the best way of shaping the economy because money supply affects macroeconomic outcomes such as Gross Domestic Product growth, inflation, unemployment, and exchange rates.

While in free market economies, central banks are charged with the duty of being the hub of monetary policy, here at home Mutharika never resisted insisting on his monetarist views in form of executive orders. His stand on the value of the Kwacha was a good case in point.

Mutharika stand has always been: “The devaluation of the kwacha will only benefit a few individuals, and they are non-Africans who are here. They want to push this proposal because what they did was to go to the market and convert their kwacha to US dollars and kept them. Suppose we devalue to K180 per one US dollar, they will quickly offload their dollars and they will make huge sums of money. These are the ones to benefit.”

Mutharika’s view has always been in tandem with what some monetarists argue that an increase in the money supply will affect mostly prices, not output. Like Mutharika’s thinking, monetarists’ view is that increase in the money supply simply raises inflationary expectations and as a result push nominal interest rates up. Generally speaking, monetarists believe in fixed money supply targets, or in regulation of how much to change the money supply. This is slightly different from the beliefs of Keynesian economists who have faith in more flexibility or discretion instead of being tied to rigid rules and regulations.

While Keynesians would advocate for discretion and flexibility on how we value the Kwacha, Mutharika’s views are nothing but bringing the monetarist assumptions to detrimental extreme.

 The Twister believes that besides our diplomatic gaffes, human rights abuses and violation of our own Constitution, one error of judgement the current administration is making is that of implementing some assumptions of monetarist thinking without considering our context as one of the not-so-rich countries in the world. Our obsession for monetarism, which is persuading those in power to keep on emphasising the role of government in controlling the amount of money in circulation by, among others, tweaking exchange rates is certainly annoying some bilateral and multilateral partners who believe that our stand on the value of the Kwacha is wrong and therefore cannot support us financially.

Had we listened to both local economists and our bilateral donors on the issue of Kwacha value when our economy was ‘booming’ the devaluation would have a positive impact, but like a drunk who becomes financially wiser when he is penniless, the recent devaluation will have some repercussions. The issue is simple - the positive impact of devaluation usually relies on the state of the economy and hence the ill-timed devaluation will lead to inflationary pressures.

The Twister is not alone in doubting the benefits of an ill-timed devaluation. One commentator Ben Sodza shares my fears. “Devaluation of currency for an ailing economy without production capacity for all its consumer goods is bad news because country relies on imported goods to supply its consumers. This means paying in foreign currency to procure the goods. If an economy can manufacture all its consumer goods and have surplus to export, devaluation becomes a joy stick that one plays with to manipulate sales of exported goods to dominate the external market; and in such case the local people are not affected.”

Sodza quizzes: “What does this devaluation affect and what else is devalued at the same time?”  He quickly points out: “All banks saving devalue translating into loss of purchasing power.  Pensions on all retired devalue [which also translates to reduction] of buying power.”

What else is affected? Pension contributed funds devalue, lowering standards of pensions, life cover Insurances devalue and premiums go up.

Furthermore, people in the village and unemployed masses suffer because their money loses buying power and people are in turn impoverished; and Sodza further adds: “Not all employers respond with salary adjustments to match devaluation [as the result] salaries lose value.

The point is that this poorly-timed devaluation may end up being inflationary and will not add much-need benefits to the economy. It is economics of the drunk who becomes wiser when he is totally broke instead of being wiser when his is financially sound. In our case, we seem to see the benefits of devaluation when the economy is plunging into a crisis and we will not reap the benefits that well-calculated devaluations generate. Devaluing the Kwacha when our tobacco is doing so poorly at the Auction Floors, the prices of cotton are also low, IMF, Britain, Germany and many other donors have closed financial taps is just like economics of a drunk of becoming wiser when one is broke.

Malawi: Behind every dictator is an arrogant First Lady

THE TWISTER

By Brian Ligomeka

The arrest of former Ivory Coast autocrat Laurent Gbagbo in the subterranean vault of his residence, hunkering down with his wife was a reprehensible but pertinent finale to his fiendish attempt to hang on to power.

The disgusting image relayed to the world of an arrested Gbagbo with a soiled vest, sopping with sweat, was beyond belief. Nobody, except for his minions, had sympathy for him because it was obvious that he was reaping the fruits of his autocracy, notoriety and arrogance.

The ugly scene of Gbagbo debacle underscored the feebleness of democracy on this continent. The presence of Simone, Gbagbo’s wife in the foxhole demonstrated how an avaricious first lady helped her power-intoxicated husband in destroying Ivory Coast. The role of Gbagbo's first wife, Simone in egging on her spouse to treat with contempt voices of reason and political wisdom from all the corners of the globe is well-chronicled.

History has it that after the rebels captured part of Ivory Coast in 2002, Simone Gbagbo, then parliamentary leader of her husband’s party, incited Ivorian women to deny conjugal rights to their husbands who supported the making of peace with rebels who had taken control of half of the country. This is why fingers have been pointed at her for influencing her husband [a professor] to reject the outcome of the presidential outcome.

Just like her husband, Simone never wanted to accept the painful reality of life that time was up for her. She was still stuck in the opulence of State House life. The defeat of her husband in polss saw her world crumbling and she had serious problems in reconciling with the fact that she would no longer be the First Lady.

With Simone’s attitude, one cannot be blamed for concluding that “behind every dictator man is an arrogant woman" and if the dictator is the head of state it does not go without saying that the arrogant woman is the first lady.

If you see some old presidents making idiotic and dubious decisions aimed at just stoking their egos at the expense of their citizenry, do not be surprised. It can be the result of the pillow talk of their wives.

Though in most countries, first ladies do not don’t hold any constitutional offices, their sheer luck of being betrothed to those in power, confers them the privilege of having power thrust on them. During my good old days at St Patricks Secondary School at Mzedi in Limbe someone used to say, “Galu wa a mfumu ndi mfumu ya agalu” which can literally be translated as: “The chief’s dog is the chief of dogs.” The adage simply says that the chiefs confer some-kind of status on everything that is in their household.

That explains why it is a mistake to assume that first ladies are just mere state house flowers or bedroom firebrands for quenching sentimental thirst of presidents; because in reality through their romantic proximity their bedroom talk sometimes translates into policies. This means that if the first lady is materialistic, hot-headed and arrogant, she will succeed in creating a monstrous dictator whose citizens will be marching in the streets against him and his policies on weekly basis.

Sometime back I enjoyed reading an article in one of my favourite magazines,The Economist,  which wrote that first ladies, especially those on this continent, brandish monstrous “bottom power”.  

In Nigeria, a story is told of one Stella Obasanjo who in May 2005, ordered a police raid at the Midwest Herald, a Lagos-based newspaper which had published a story headlined ‘Greedy Stella,’ linking her to the questionable sale of government houses to her relatives.

When the Nigerian police were quizzed on the raid, they admitted to have acted on orders from above. The “powerful above office” was that of First Lady Stella.

Stella was in the limelight for her patronising behaviour which saw her at one point banning wives of state governors from addressing themselves as ‘Her Excellency’.

And in the same nation of Nigeria one cannot forget what happened after President Sani Abacha’s death. His widow Mariam was arrested in scandalous circumstances, as she fled with suitcases stuffed with US dollars.

With such scandals, The Twister does not blame a Kenyan journalist Emeka Mayaka for branding some African first ladies as “opportunists who have used their positions to amass wealth for themselves through questionable charitable organisations.”

How I wish the Kenyan journalist knew that some first ladies are so greedy that they even accept to be receiving monthly salaries including housing allowances for charity work. Oh my foot! Why receive a housing allowance when you already reside in State House?

While in Malawi, our women who have been serving at the State House Mama Cecelia Kadzamira, Anne Muluzi, Shanil Muluzi and late Ethel Mutharika never dared to poke their noses into politics, it seems we have our own Queen Dzeliwe Shongwe, ‘the Great She Elephant [of Swaziland.’ For starters, Queen Dzeliwe Shongwe was a senior wife of King Sobhuza II of Swaziland. She was one of the greatest beneficiary of propinquity to a powerful husband.

With nice, sweet pillow talk, the Queen Shongwe asked her husband to name her a joint Head of State in 1981 and King Sobhuza II did just that, but later revoked it.

With Bingu wa Mutharika declaring: “I will smoke out my critics,” and his wife Callista mumbling: “Let the civil society go to hell. Villagers don’t need fuel and forex”, The Twister keeps on asking himself how can someone in their right frame of mind lie that people in the villages do not need fuel. Is it ignorance, arrogance and sheer political blindness or opulence intoxication? Who in this country does know the ‘fuel’ needs of the villagers? If there is one, he or she must be coming from another planet.

The Twister takes in the solace in the fact that 2014 will be the judgement year and assumes that rigging through pre-ballot stuffing, result altering through tabulation and diversion of telecommunications lines will not be possible.

The article first appeared in The Daily Times of Malawi

Of Malawi leader's public lecture, arrogance and empty gimmicks

THE TWISTER

BY BRIAN LIGOMEKA

The political pot is boiling. The civil society organisations are planning to hold demonstrations to protest against poor governance and economic woes dogging the country. Poor economic management, the obvious putrid fruits of decayed fiscal and monetary policies are manifesting themselves through fuel shortages, forex scarcity, high unemployment and poverty.

The once over-hyped moniker of our leader as an economic engineer, which we were persuaded to accept as true during yesteryears has turned to be a political falsehood.

I was on a fuel queue with my son this other day and he turned to me and asked: “I thought people were alleging that Atcheya was uneducated and his handling of economic issues was shambolic, why is it that during his ten-year reign, Malawi never experienced fuel and forex shortages as is the case now when our country is being led by a professor and an economics PhD holder?”

Honestly speaking I had no answer. All I did was to hit back at him with suggestions: “Go and ask your lecturer if education can remove political arrogance, myopia and egocentrism. Find out from your lecturer what happens when you are very advanced in age in terms of your reasoning capacity and your attitude towards others. Ask your lecturer about the age at which one starts showing signs of being senile?” Then you will have an answer.

If you don’t find an answer from your lecturers, then read an investigative audit and management report of the special committee of eminent persons on the operations of Comesa part of which declares:

 “The relations between Comesa and its institutions, and Member States are restrained because of the demeanour and arrogance of the Secretary General. He has created more misunderstanding and hatred in the institution and member States than he has made friends.”

The report laments in part that its Secretary General did not fully utilise his directors for decision making as a team as he was fond of summoning them either “to lecture to them, rebuke or impose his will on them”.

 “The net effect has been to reduce his directors to implementers of his directives which by and large breach the existing legal instruments. Indeed, he uses them to rubber-stamp his decisions,” reads the Comesa report in part that ended in that Secretary General being fired.

I told my son that if he reads that Comesa Report he would understand why Malawi is embroiled in political and economic quagmire; and why this country is at risk of degenerating into a dynasty.

I made those suggestions to my son because I did not want to tell him that while high education makes some become better citizens, the same high education turn others into crazy, arrogant, egoistic and nepotistic individuals.

The point is that Atcheya had his own basketfuls of political and economic goofs including the third term psychosis, but the performance of the current regime leaves a lot to be desired. Malawians are now bearing the brunt of the dictatorial, disastrous and tactless leadership whose consequences are the fuel queues, enactment of idiotic laws, the freezing of donor aid and many other idiosyncratic gaffes. Just imagine at the peak of the current diplomatic gaffes, fuel and forex shortages, someone believes that the best solution he can offer to Malawians is to stage a public lecture which has already been snubbed by the opposition and the civil society as cataclysmic and contemptible.

The current crises do not need political gimmicks in form of public lectures, neither do they need public lies as answers. They need real solutions and not empty talk and arrogant excuses sandwiched with distorted Pan Africanism philosophy and political sovereignty postulations that ignore the fundamental benefits and costs of globalisation and good governance.

Of dictatorships and dynasties in Africa

THE TWISTER

 BY BRIAN LIGOMEKA

The Twister is keeping an eye on the political developments in North Africa and Middle East with keen interest. The sudden and swift collapse of autocrats in that region is astonishing and remarkable because just like the rest of dictators, we have on this part of the continent autocrats in the Arab world were egoistic, cruel, corrupt and extravagant. I never anticipated this political trend in that region.   

What I know is that some dictators in the Arab world took pleasure in depriving the populace of their basic human rights including freedom of the press and academic freedom while through nepotism they enriched a small minority of their minions, ethnic citizens and political puppets at the expense of national development.

Even when the winds of change started blowing in those dictatorial regimes, some despots attempted to hold their grip on power by using all forms of terror and repression, but their tactics never worked at all. Perhaps we need to go back in memory lane by looking at how mass protests resulted in the downfall of Tunisian leader Zine Al-Abidine Ben Ali and Egyptian President Hosni Mubarak.

The Tunisian popular revolt amazes me because it was triggered by a mere vegetable vendor, Mohamed Bouazizi. The genesis of it was a police officer who slapped him in broad daylight and confiscated his vegetables.  The young man could not take that humiliation and he set himself on fire. Unfortunately for the dictator of Tunisia, the 26-year-old vendor died on January 4 and his death fanned a popular revolt whose consequence is well known.

Inspired by how Tunisians kicked out their dictator who had oppressed them for 23 years, Egyptians followed suit and toppled Hosni Mubarak within three weeks. Mubarak’s downfall reminds me of how Indonesian dictator Suharto who ruled for 31 years was also shown the political exit in 1998 after mass protests. The revolutions in Egypt, Tunisia, Libya and Syria demonstrate that when people are tired of dictatorial rule, they can topple their leaders.

While in North Africa and Middle East revolutions are working miracles, we seem to have a different chapter on this part of Africa. We seem to tolerate dictatorships and even allow them to degenerate into monarchs where heads of state transfer their executive power to their off-springs and relatives.

Congolese allowed Joseph Kabila to inherit the presidency and run their country from his dad Laurent Kabila.Autocrat Gnassingbe Eyadema, who ruled Togo with an iron fist for 38 years, died in power and his son Faure Gnassingbe Eyadema took over power and revolved into a dictator.  In Gabon, Omar Bongo after four decades of being in power, his son Ali-Ben Bongo took over power from him .

The point I am driving at is that it is possible to stop relatives of dictators from taking over power from their dads and uncles, however that is only possible when you are not in deep political slumber.

Relatives of dictators can easily take over power from their dads and uncles in a political environment where the opposition is weak and citizens are docile. As far as The Twister is concerned, dictators must be stopped in their tracks regardless of their rhetoric or their exaggerated achievements which are obviously financed by donors and taxpayers money. Never dare to ask The Twister which dictator on this part of the continent is grooming to have his relative as the next president, because he does not have a ready answer.

Malawi’s zero-deficit budget delusion

The Editor of The Daily Times BRIAN LIGOMEKA analyses the 2011/2012 Malawi National Budget and here is his analysis.

Since the attainment of Malawi’s independence way back in 1964 from Britain, this Southern Africa nation of 13 million people has, for many years, depended on donor handouts, part of it dubbed as budgetary support to run the economy. Over the past five years, in preparing its national budget, donor financial injection towards the national budget has been hovering between 30 to 45 percent.

It was amusing a fortnight ago when Finance Minister Ken Kandodo in part of his budget speech boldly declared: “In conclusion, Mr. Speaker, Sir, what I have presented before this August House this afternoon, is a Zero-Deficit Budget which has presented a radical paradigm shift in the manner we prepare and implement the National Budget in Malawi… Simply put, this Budget has it all: ‘Zero Deficit, Pro-Poor, Development-Oriented and Investment-friendly Budget.”

The zero-based budget is a concept which assumes that your total income minus your total expenditures will equal to zero. When implemented with strict fiscal discipline and prudence in a stable macro-economic environment, zero-deficit budget purposely means government will put every kwacha  [revenue] generated to good use. In the event that during a certain period, government has spent less financial resources out of the revenue generated, those resources, can be allocated to where it is most needed instead of letting it dissipate through extravagance.

Is zero-deficit budget really practical? Surely, yes! Oil rich United Arab Emirates has for a number of years been running its economy based on zero-based budgeting.

Following the presentation of the budget in the National Assembly, some naïve Pan African-minded Malawians are hero-worshipping government for this bold move, charging that the zero-deficit budget will instantly put the country on the path to economic independence ending our historic record of being an aid dependent nation. The question they like to pose is: “For how long will we remain beggars?”

Such Pan Africanist thinkers are inspired by arguments advanced by anti-aid economists such as renowned African economist Dambisa Moyo who in her book ‘Dead Aid’ rubbishes western development policy for Africa as a sham.

Moyo contends strongly that over millions of dollars in development-related aid that has been transferred from rich countries to Africa has not improved the lives of Africans. In fact, according to her thesis, the recipients of this aid are much worse than had they not received a dime of free money. She peddles the view that over-reliance on aid has trapped developing nations in a vicious circle of aid dependency, corruption, market distortion and poverty, leaving the poor with nothing but the quest for more aid.

Moyo is not alone with such thinking. Malawi’s own Chiku Malunga in his book, Oblivion or Utopia: The Prospects for Africa (2010) has no kind words for donor handouts in whatever form. “Donors being smart people are not keen to support us in such a way that we will reach a stage where we will not need them. They may support us in such a way that they think may hurt them in the future. It is said, if you want your domestic worker to continue slaving for you, then control his poverty.”

Malunga in his book contends: “What this means simply is that we should not expect aid in its form to bring about economic development to Africa. Aid can bring what aid can bring – relief and not development. It is a rule of life that development is always endogenous. Development comes from within and not without.”

According to Malunga, “there is no continent or country in this world that was developed by aid. The best aid can do is to help the continent develop its capital so that the continent or country can become an equal player in the world.”

Concluding his book, Malunga reasons: “Africa is at a cross-roads. It is faced with oblivion or utopia as real possibilities. Fifty years of aid based development have failed. Close to US$2.3 trillion of aid has left many people worse off (van Gelder 2008:33). Continuing on this path is moving towards oblivion.”

With similar views expounded by President Bingu wa Mutharika in his book “The African Dream: From Poverty to Prosperity,” it is not surprising to see that there are some local economists and their disciples who believe that that time is ripe for Malawi to stand on its own feet by using local resources to run our recurrent budget instead of continuing being beggars or [budgetary support dependents] forever.   

Arguments by Dambisa Moyo, Chiku Malunga and President Mutharika that aid does not spur development are in my view misplaced because aid when well utilised can lead to economic growth.  Just after the second World War, economies of many European countries were in recession; but thanks to the massive programme of aid from the United States which started in 1948 and was officially known as the European Recovery Program, but is more commonly known as the Marshall Plan, after the man who announced it, US Secretary of State George C. Marshall, the nations were able to recover quickly.

The aid recipient nations included Austria, Belgium, Denmark, France, Greece, Iceland, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Sweden, Switzerland, Turkey and United Kingdom.

The effect of ‘Marshall Plan’ aid was positive and tremendous because the recipient nations experienced an economic growth of between 15 – 25 percent.  In those  European nations, aid stimulated industrial growth and agricultural production. The shortage of foreign currency was also addressed thereby allowing massive gains in international trade through exports and imports. While the aid beneficiaries of Europe are wealthy nations, the aid beneficiaries in Africa remain poor countries.

In Africa, aid fails to kindle economic growth and national development because it ends up in pockets of corrupt fat cats who before ascending to power were just mere minibus drivers and conductors. The moment they take the reigns of power, the former bus conductors become millionaires overnight and their huge appetite for opulence is mirrored in the huge mansions they built which if you check their payslips is beyond their means.

With some economists who mistakenly assume that aid never spurs development and economic growth in power at the moment, even the cautions that the implementation of zero-deficit budget will force government to resort to domestic borrowing to finance its spending does not budge their thinking because in their view the level of government borrowing is an important part of fiscal policy and management of aggregate demand in any economy.

Their argument is that in any economy even in developed nations, when the government is running a budget deficit, it has to borrow money through the issue of debt instruments such as Treasury Bills and long-term government bonds. Such borrowing in their myopic analysis is okey because the emergence of a rising budget deficit due to a weakening economy on one hand means government spending on priority areas such as health, education, transport and agriculture on the other hand.

Consequences

Despite the rosy picture painted by Kandodo and the arguments propounded by economists who bash western aid as shrewdly-packaged assistance that creates dependency syndrome because as Malunga points out in his book “a nation that cannot finance its own national budget but has to depend on others to finance it, is a beggar nation,” Malawians will face the pinch of this new paradigm shift.

Let’s face facts. With donors pulling out, government will resort to local borrowing defeating the same concept of zero-based budget. Local borrowing will result in inflation, high interest, thereby crowding out the private sector. In that scenario, the description that the budget is pro-development and pro-poor is a fallacy.

Our economy is still at the stage where the resource base is so narrow. The same simple argument remains, thus if you want to milk the cow, you need to feed it. In this case, the government is heavily taxing people and businesses which are the source of growth. The question is: How do you expect growth from a thin animal, which is being over-milked through numerous taxes?

The reduction in disposable income for both firms and individuals will result in the economy contracting defeating the same ambition of pro-development agenda. Hence, the consequences will be borrowing and taxing more. Certainly, you have to have miracles to achieve zero deficit in such circumstances.

Furthermore, despite Kandodo’s financial rhetoric, careful analysis shows that the current budget is both inflationary and contractionary, thanks to revised and new duties and taxes imposed on almost anything including shares, bread, meat and imported wheat flour.

The budget is inflationary in the sense that price increases are inevitable as manufacturers, importers and the business community will pass the new taxes to consumers through pricing and the multiplier effect will be at work which will see inflation affecting almost all the commodities and services in the economy.

The budget will lead to the contraction of the economy or decline in economic growth because in the absence of the budgetary support, government will mop all its revenue from the economy, [money will move from the economy to government coffers, leaving people with less disposable income].

Chancellor College senior economics lecturer Dr. Exley Silumbu  was spot on when he told this paper recently that Malawi cannot achieve a “zero-deficit” budget this year because of anticipated decline in economic growth for the country as projected by both government and the International Monetary Fund (IMF).

According to Silumbu, most of the measures introduced in the budget are restrictive to production and consumption, hence will lead to further shrinking of the economy and decline in tax revenue.  “Actually, I expect economic decline even further than estimated because of the budgetary measures as announced by the minister of finance,” he predicted.

The decline of the economy will continue in the next few years as the 2011 World Economic Outlook of the IMF projects Malawi’s economic growth for the year to be at 6.1 percent, a decline from 6.6 percent growth achieved in 2010. It also projects the country’s growth to further decline to 5.7 percent in 2012 and to a mere 5 percent in 2016. With some donors having frozen their aid, coupled with the poor tobacco prices and ever-increasing trade deficits, the economic decline might indeed be worse than the projected figures.

Contributing factors

Much as our balanced budget glitters on paper, we should recall that even when we were receiving budgetary support from our traditional donors, government was still having budget deficits. The question is: How will the same controlling officers who were fuelling deficits through expenditures in their various ministries and departments, all of a sudden perform miracles by using locally generated revenue prudently? Have we forgotten that we have controlling officers within the ministries who awarded themselves allowances for 1000 days in a single year, when in fact there are only 365 or 366 days in one calendar year?

Just in the next few months after the presentation of the zero-deficit budget, the harsh reality will catch up with us. Government will slip into deficits, which it will attempt to tame by resorting to domestic borrowing. The consequence of heavy domestic borrowing will be the crowding out of private sector in the debt capital market in short and medium term while in the long run, domestic borrowing would translate to even higher taxes as government will be hunting for money to repay that huge accumulated national debt.

The nerve-racking aspect of it all is that the subsequent implementation of the zero-deficit budget is coming under the backdrop of our sour relations with some donors. With some frozen donor aid, compounded by the anticipated rising oil prices due to political conflicts in the Arab world, it is wishful thinking to assume that Malawi will implement the current budget without facing impediments.

Forex shortages

Besides the new budget leading to the contraction of the economy and subjecting people to the consequences of inflation as a result of the numerous taxes that have been introduced, thereby inhibiting their purchasing power, our poor relations with the donor community will exacerbate the forex and fuel shortage situation.

Whether we like it or not, we need to accept that we virtually import everything from toothpicks, apples, tomatoes, drugs, fuel to automobiles. Much as our taxes which we pay in Malawi kwacha, can be used to meet some local expenditure items, as a nation, we need US dollars and Euros for paying for fuel, drugs and fertilizers. That forex will not come from tobacco which has been hit by a quad-epidemic of poor quality, oversupplying resulting in cheap prices, international conspiracy and anti-smoking campaigns. Neither can that forex be generated from uranium from Karonga whose income is not banked in our domestic banks. In as far as issues of forex availability are concerned, we are in for a rude awakening.

Kandodo’s  assertion that resources have been shifted towards infrastructure developments of the country, hence, we have a Pro- Development Budget as opposed to a Consumption Budget is both empty and cosmetic because the allocation of resources to the fertiliser subsidy is still huge while the private sector which was supposed to be motivated with incentives to stimulate economic growth has been slapped with innumerable taxes. How can we prop up investment if government has all of a sudden declared that sales of shares regardless of the time of disposal would be subjected to capital gains tax? The move is actually spitting at the investors in the face who will disinvest from the local bourse.

Even the Malawi Confederation of Chambers and Commerce (MCCCI) has hinted that the new tax measures will hurt the local industries and just as they are likely to impact foreign direct investment. “The new tax measures will in the long run worsen the investment climate which is already on a decline because of unreliable power outages, water shortages and the high cost of service," Chancellor Kaferapanjira, chief executive officer of the MCCCI, told the media.

Supporting the same view is a think-tank of local economists, the Economics Association of Malawi (Ecama), which has branded the current budget as an act of “desperation” as the country’s economic environment does not allow for such ambitious budgeting.

“Unfortunately, the zero-deficit budget concept in Malawi is being implemented at a time when the global economy is just recovering. Added to this are the huge economic challenges facing the country’s productive sectors — largely bordering on forex shortages,” says Ecama in the statement.

In a macro-economic environment where tight fiscal discipline is part of the game and a nation’s relations with major cooperating partners are sound, zero-deficit budget is the way to go as a strategy for attaining economic independence, but in our current scenario, this budgeting system is poised to breed more miseries on Malawians in form of high inflation, which even if it will be officially manipulated so that it remains on single digit, in reality it will manifest itself in form of general rise of prices.

If you ask me, the way the term ‘zero deficit budget’ is being used in Malawi, is misleading: How can you have zero balance when you acknowledge in the same budget that development budget has factored in donor funding.