Malawi opposition warns economy going to ruins

By Joseph Kayira Feb 16, 2012, 12:31 GMT

Lilongwe - Malawi's opposition says the country is heading towards economic disaster, citing strikes paralyzing the country's courts, an acute lack of drugs in hospitals, agricultural shortages and depleted foreign currency reserves.

Crucially, donors are cutting Malawi off. The country has long relied on foreign aid to pay civil servants' salaries, but European governments are now concerned about economic mismanagement in the landlocked southern African nation.

President Bingu wa Mutharika shot back at his critics, saying allegations that his country is off-track 'do not have the truth in them.'

Rejecting domestic criticism from non-governmental groups, he has threatened to cut off their funding from aboard, saying 'legislation must be passed to make civil society organisations accountable.'

Western diplomats say Mutharika has developed autocratic tendencies. In July 2011 at least 20 demonstrators lost their lives in a police crackdown on opposition rallies demanding political and economic reforms.

While the deaths closed the door on an Arab Spring-style popular uprising, there is still a vocal demand for change.

The president is now under pressure from abroad too. The International Monetary Fund wants him to take tough measures, including a devaluation of the currency, the kwacha. The move could cause price hikes and Mutharika is putting up a fight.

'My ardent appeal to the IMF and the Western development partners is to allow my government a short time space of three years to try to put in place policies that will restore resilience in our external balances. If we fail then we can try devaluation,' the president told the opening of parliament last week.

'Western donors should help government in its attempts to find lasting solutions to these problems instead of choking our throats,' Mutharika urged.

The president has already introduced an austerity budget, and admits Malawi cannot forever rely on foreign governments to pay salaries. He plans to compensate 170,000 public sector workers from taxes.

The opposition says the president is just buying time and lacks a clear policy to boost the economy and bring in desperately needed foreign investment. Critics also say the country does not have a strong tax base, and locally collected duties would not suffice to cover government expenditure.

'For a leader who has 26 months remaining before he leaves office, it is difficult to understand that this government is asking for three years to experiment with people's lives,' said Atupele Muluzi, a top member of the former ruling United Democratic Front.

Malawi is one of the least developed countries in the world and was hit hard by the global economic crisis. According to the United Nations, the country's health, education and economic indicators lag far behind fellow sub-Saharan African nations.

European donors say they want to see the government take on the IMF programme for Malawi. With budget support from former colonial master Britain already gone, the country could now lose another 265 million dollars from Brussels if it does not comply.

On top of poor fiscal management hurting the kwacha, the country's main earners of foreign currency are fairing poorly.

Maize exports were suspended because of severe food shortages. Tobacco production will likely be low in the coming harvest, owing to poor rains.

The opposition is challenging the president to come up with a plan, and fast, as the country sinks.

Court cases are stuck in limbo since early January, when the judicial system staff went on strike demanding wage reform.

'The strike has gone far too long and it is undermining the judicial independence, operations and legitimacy,' says Gift Mwakhwawa, head of the Malawi Law Society.

Meanwhile, drug shortages at hospitals are getting worse, as Britain used to pay for medicines. What little disposable income existed in the poverty-stricken country is quickly disappearing, owing to instability and job loses.

Adding to his woes, Mutharika is meant to host the next African Union summit in July. But Vice President Joyce Banda recently wrote an urgent letter to the president saying the country simply lacked the funds to pull off the event.

'Malawi is going through the worst economic difficulties in its history,' said Banda.