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CSOs warn IMF on austerity measures as Malawi’s economy hemorrhages

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DISCUSSED ECONOMIC ISSUES—Chakwera (left) and Georgieva

By Eric Msikiti, Jarson Malowa & Richard Chirombo:

Charity Oxfam, which has joined dozens of civil society organisations (CSOs) in a campaign against International Monetary Fund (IMF)-initiated austerity measures, has warned that the insistence by the Bretton Woods institution for developing nations to introduce new austerity measures to reduce debt and budget deficits could make it even more difficult for the countries to meet the needs of their populations.

Finance ministers have been meeting in Washington, the United States (US), for the IMF and World Bank annual meetings as developing nations, including Malawi, are facing record poverty levels as they recover from the Covid pandemic.

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Oxfam and CSOs argue that developing countries do not need more punitive measures but, rather, programmes that will help lessen the burden on their economies.

In a statement, the charity says while injecting trillions in their own economies, rich countries failed to increase aid to resource-poor countries during the pandemic, a development that has made it difficult for poor countries to take the steps needed to counter the inequality explosion created by the Covid.

“Our index shows that most governments ripped away public services when people needed them most and, instead, left billionaires and big corporations off the hook to reap record profits,” the statement quotes Oxfam International Executive Director Gabriela Bucher as saying.

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The statement then warns that brutal public spending cuts and pay freezes could further increase inequalities, especially in developing countries.

An analysis from Oxfam and Development Finance International shows that despite the worst health crisis in a century, half of lower middle-income countries cut their share of spending on health, education and social protection, a situation that has increased poverty levels in the countries.

Apart from grappling with the problem of budget cuts, countries, notably those in the Commonwealth, are facing the challenge of spiraling inflation.

This was observed when, on Wednesday, Commonwealth finance ministers met on the margins of the World Bank and IMF meetings in the US for the Commonwealth Finance Ministers Meeting 2022.

The main agenda was to address emerging economic issues facing the global economy and Commonwealth countries.

The ministers observed, among other things, that the effects of the Covid pandemic, ongoing geo-political tensions and their impact on global output and supply chain disruptions have led to global inflationary pressures for many Commonwealth members.

Commonwealth Secretary General (SG) Patricia Scotland said fiscal authorities play a crucial role in tackling challenges such as those besetting the world.

“The economic challenges facing us necessitate concerted efforts to develop viable strategies to revive and revitalise our economies for the benefit and well-being of Commonwealth citizens,” she said.

Scotland added that no one has to be left behind in the drive to achieve strong economies among Commonwealth countries.

“To achieve the future we want, a future that leaves no one behind, global and regional collaboration remains imperative. We need to acknowledge that while the rising cost of living affects everyone, it disproportionately affects climate-vulnerable, small, developing and low-income countries,” the SG said.

Going forward, Scotland emphasised the need to have Commonwealth countries supported.

“More needs to be done to provide inclusive debt relief and financial support to them all. Furthermore, there is also the need to strengthen debt management systems to contain public debt at manageable levels,” she said.

Some of the finance ministers stressed the need for policy support measures to tackle the cost-of-living crisis as well as food insecurity, especially for member countries dependent on imports of basic commodities.

Among Commonwealth nations, average inflation rose from 4.1 percent in 2021 to an estimated 6.6 percent in 2022.

However, Commonwealth small states have experienced larger increases, with inflation doubling from 2.7 percent in 2021 to 5.4 percent in 2022.

Asked on Malawi’s stand on austerity measures, Finance Minister Sosten Gwengwe told The Daily Times that the country’s priority is fiscal consolidation as the only way to reduce budget deficits.

“For Malawi, key is to deeply restructure our current debts and work on starting to reduce our fiscal deficits,” Gwengwe said.

In September this year, IMF Director Kristalina Georgieva said she was impressed with Malawi President Lazarus Chakwera’s unwavering commitment to forge ahead with ambitious reforms that are billed to transform citizens’ lives.

Georgieva said this after holding discussions with Chakwera in the US, where she lauded the Malawi leader for working towards restoring macroeconomic stability, including tackling unsustainable public debt.

The two met at the IMF headquarters and the IMF boss said it was “a very thoughtful and productive” discussion on the difficult economic situation facing Malawi.

In a subsequent statement, Georgieva said IMF personnel were working steadfastly to have the IMF team visit Malawi to discuss next steps and explore options to address the country’s immediate financing needs and support its reform programme.

“We agreed that tackling the country’s economic challenges effectively calls for a concerted effort by all stakeholders, including the support of the international community,” the statement indicated.

And, writing on his Facebook page, Chakwera said the meeting was “a cordial meeting centred on our obligations and IMF’s commitments to the pursuit of an Extended Credit Facility for Malawi.

“I also held discussions with Mr Axel van Trotsenburg, Managing Director of the World Bank Group. We discussed the targets Malawi is aiming to reach to fast-track the disbursement of $1.5 billion that has been approved by the bank for projects in our country,” Chakwera said.

This happened when the Malawi leader was attending the United Nations General Assembly in the US.

Malawians can only wait and see— just that their patience is running thin.

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