Think of The Poor: CfSC Statement on The Current Economic Slowdown.

It is no doubt that Malawi is facing an economic slowdown. That Malawians are struggling to make ends meet due to the current economic turmoil is now a mutually agreed fact. In his “Statement on the Status of Economy” in Parliament, the Minister of Finance Honourable Dr. Ken Lipenga, MP indicated that the economy would slowdown by 0.9, from 6.9% to 6% in the current fiscal year. The International Monetary Fund (IMF, 2011) projections paint even a grimmer picture, hinting that the economy will grow just by 2% compared to a 6% growth rate the previous years. Equally, the Minister of Foreign Affairs Honourable Peter Wa Mutharika, MP during a mass rally in Mzuzu, acknowledged that “the country is going through an economic crisis” albeit attributing the crisis to global trends. All these assertions, though a good development, fall short of inspiring hope among Malawians because government has not yet outlined clear and prudent policy prescriptions to bring the economy back on track.

Proposals to borrow money from foreign banks in a bid to boost forex import cover to solve the fuel crisis, suggestions to further re-align the kwacha to reflect its true market value, proposition to further hike fuel prices and a contentment to perpetuate a taxation regime that hits the low-income earners harder remain artificial moves, as they do not address the underlying issues affecting the economy. Actually, such measures only postpone problems to future generations which will eventually bear the brunt. Malawi ought to create a positive economic environment influenced by improvements in macroeconomic policies and structural reforms. The estimated growth equation indicates that per capita real GDP growth is positively influenced by economic policies that raise the ratio of private investment to GDP, promote human capital development, lower the ratio of the budget deficit to GDP, avoid overvalued exchange rates, and stimulate export volume growth. Of vital importance is also the promotion of alternative sustainable eco-friendly sources of energy. In the absence of these, promises by the Minister of Finance that 2012 will be a good year may be conceived as aspirational.

Great uncertainty exists as to what policies can and should be pursued in the context of the current crisis. People need solutions to the problems they are in. Parliament, currently sitting, should seize the opportunity to ask profound questions pertaining to the values and priorities to be adopted to guide the nation through these difficult times. What future do we want to emerge from the current crisis? What choices need to be made now to ensure that such a future will come about? What values will shape this period of our history – those that represent self-interest and sectional concerns, or those which reflect the common good and the protection of the weakest?

The recent UNDP Human Development Index Report (HDI, 2011) which measures “the expansion of people’s freedoms and capabilities to lead lives that they value and have reason to value” has ranked Malawi at 171 from 153 in 2010. The slump in the index is largely attributed to more countries entering the index this year; however an analysis of the movement of the actual indices reveals that Malawi has not registered much progress in view of the county’s economic growth for the past years which was at 6%. According to the Programme Officer for Social Conditions Programme, Mr. Alex Nkosi, “This means that the economic gains that Malawi has garnered in the recent past are not making a real dent in the pervasive poverty to enable significant improvements in social conditions.” Correspondingly, the Centre for Social Concern (CfSC) Urban Basic Needs Basket for November shows that the cost of living on essential food items continues to skyrocket. CfSC has noted that in the month of November 2011 certain products in the food basket like Maize, Beans, Usipa, Utaka, Kapenta and Bread have increased tremendously from the previous month, while others have maintained or slightly gone up.

For instance, the price of maize has surged upwards tremendously. Mzuzu, the hardest hit, has witnessed an average maize price rise by 28.2% (K2, 200 per 50kg bag) in November as compared to average price in October which was at K1580. On average, the same trend has been observed in all the major cities: in Lilongwe it went up by 11%, Zomba 13% and in Blantyre maize registered an increase of 10%. Most sellers in the market attribute the increase to scarcity of the commodity and an increase in the cost of transportation.

In Zomba the price of bread has gone up by 27.8%. In October (on average) a loaf of bread was at K153 and in November it went up to K212. The survey has revealed a similar price tendency in Blantyre, Lilongwe and Mzuzu where prices have gone up by 25%, 20% and 11.4% respectively. According to Bread Bakers, the price increase is attributed to an increase of wheat flour (most of which is imported) and transportation costs in delivering the commodity. All in all, the average cost of the CfSC food basket for a family of six rose by 10.9% from K29, 470 in October to K33, 107 in November. The average total Basic Needs Basket comprising food and no-food items for a family of six for Mzuzu, Lilongwe, Zomba and Blantyre has increased to K61, 778 in November from K57, 407 in October, 2011. Of great concern is the rise in the price of maize, a staple food for Malawians and bread, a commodity mostly used by urban dwellers.

These are figures. But behind the statistics are millions of lives of Malawians that are struggling to eke-out a living. As Alex Nkosi observes, “The increasing gap between people’s income and the cost of living invokes a question as to how poor Malawians are making ends meet. As the figures indicate; the obvious consequence of the rising costs of food items is that the purchasing power of low-income and middle-income consumers continues to deteriorate resulting to diminishing levels of disposable income. Lack of disposable income has adverse effects on the economy since its people’s ability to spend that stimulates the market. Being a rainy season, low-income earners will be hit hard by this sharp rise in the cost of living because most households will have to buy farm inputs in the midst of nonexistent disposable income”.

“Now, more than ever”, asserts Mr. Nkosi, “we need to reassert the importance of the value of uMunthu - social solidarity, fairness, and compassion. We need to see ourselves as citizens with a shared responsibility for the common good. And most significantly as servants of the people, our politicians must recognise the symbolic importance of their being willing to sacrifice some of the considerable financial benefits they enjoy, in a context where millions of Malawians are unable to meet their minimum food requirements to live a dignified life. Forfeiting the proposed unprecedented salary increase for the MPs would be a good gesture in the right direction!”

For more information and feedback, please contact:
Alex Nkosi,
Social Conditions Programme Officer
Center for Social Concern, P.O. Box 40049, Lilongwe, Malawi
Tel: 265-1-715-632 Fax: 260-1-716-136 E-mail: alex.nkosi@cfscmalawi.org or alexnkosi@yahoo.com / cfsc@malawi.net
Location: Next to St. Francis Catholic Parish, Area 25C, Kanengo Website: www.cfscmalawi.org