Economic commentators have expressed mixed views over newly appointed Minister of Finance Simplex Chithyola Banda 4F plan to resuscitate the economy.
Chithyola Banda has indicated that his plan to stabilise the ailing Malawi economy is to focus on addressing fuel, forex, food and fertiliser woes in what he calls the 4F plan.
He says this will be achieved through debt restructuring and management and diversifying economic activity.
Chithyola said this in an interview, on the sidelines of his visit to Msonkho House in Blantyre on Tuesday.
He mentioned that strategically he wants the Malawi Revenue Authority (MRA) to explore broadening the tax base into green fields and employ front loading in mining projects.
“I have started engaging development partners for us to do debt restructuring and debt management. We are also trying to diversify economic activity to maximise and stablise our economy. For example, I have asked the MRA to explore tax collection from green fields and carbon financing projects. So, we will focus on structural reforms to instill hope in Malawians that the country can mobilise enough resources to support essential services.
“Malawi has established the carbon market initiative. We want to make sure that Malawi considers carbon trading as one of the sectors of the economy where we can get revenue and boost the economy. We also want to look at mining discounted projects. This is where we are going to value the mineral deposits in the country and monetise them so that we are able to engage investors and say we have rutile in Kasiya, we have gemstone, niobium and ruby—what can we get from these after we engage foreign direct investors as they give us what we call front loading so that we can inject something into our economy,” Chithyola Banda said.
Economist Betchani Tchereni said considering that Malawi does not have foreign exchange to get the most important commodities it imports, front loading is a good idea.
“This has been untapped. This is where we know we have resources and know we need to mine them but they are not being mined. People have got licences and they have been selling or trading those licences before they even start the mining.
“Front loading is to say we know there is so much gold on this probable mine or whatever mineral it is. If you are going to look at that from a mid-point pricing world wide, you should be able to make so much by the end of the mine life; so, you must begin to give us the resources now. That has two advantages; first you are going to pin that miner to do the mining and, two, you are going to get the much-needed resources; so I see some sense in that,” Tchereni said.
But Executive Director for the Consumers Association of Malawi, John Kapito, said the country is facing serious economic challenges and the minister’s plan is addressing symptoms and not causes.
Kapito said Malawians are expecting the minister to unveil his economic master plan that will focus on the short and medium terms strategies that will focus on dealing with the causes of the symptoms of the challenges.
“The statement from the minister doesn’t inspire and give hope to many Malawians. He missed the opportunity where he would have provided Malawians with lasting solutions to the current solutions.
“Debt restructuring is not an end in itself; we need strategies to end borrowing. What is the wisdom in structuring current debt and you continue borrowing? one of the challenges choking the economy is high taxes in a fragile economy and this is an area where we are expecting the minister to address and, sadly, he doesn’t seem to understand and appreciate that some of the reasons of our sluggish economy is as a result of high taxes,” Kapito said.
He added: “Mining is one area which has been mentioned several times by finance ministers but the minister should focus more in identifying the reasons why there is no activity on that sector despite having all the deposits and that is a long term economic stabliser that has no immediate impact on the current economic challenges. My advice to the minister is to come up with a strong economic plan that will begin to address those symptoms; otherwise, this is a cheap warehouse plan,” Kapito said.
