Economic and social commentators have said they expect President Lazarus Chakwera to lead by example when imposing additional austerity measures he has directed Finance Minister Simplex Chithyola Banda to implement.
On Wednesday night, Chakwera told Malawians in a televised address that he had instructed Chithyola Banda to bring in additional austerity measures in the mid-year budget review to cut spending in line with the Extended Credit Facility programme by the International Monetary Fund (IMF).
Austerity measures are policies that aim to reduce government spending, increase taxes and limit public debt.
Finance lecturer at the Catholic University of Malawi Ferdinand Mchacha said the appropriate solutions to Malawi’s economic situation may not be politically popular as the President must start imposing some of the austerity measures for the good of the nation without considering his political ambitions or the impact on his close political friends.
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“Suspend all foreign trips and cut local travels for the President, the ministers, government officials and State owned enterprises. The leadership talks about cutting travel, but it normally ends at just a statement,” Mchacha said.
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He also suggested a reduction in the number of Cabinet ministers, saying a Cabinet of 10 ministers would be effective and efficient.
Mchacha added that the government continued to enrich banks and other financial institutions through interest payments on borrowings.
Consumers Association of Malawi Executive Director John Kapito said Chakwera’s austerity measures were just mere talk.
According to Kapito, the President should have been the last to talk about such measures, knowing fully that his office is the first office that is unable to implement such measures.
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“He has failed to explain implementation of these austerity measures,” Kapito said.
Glasgow-based economist Velli Nyirongo Thursday said Chakwera’s directive to introduce additional austerity measures in the mid-year budget review reflected the government’s commitment to aligning with the IMF’s ECF programme.
He was quick to note that the socio-economic context in Malawi presents a delicate balancing act.
According to Nyirongo, Malawians are grappling with significant financial pressures, including rising consumer prices, pervasive unemployment and an overburdened tax regime.
He observed that in such an environment, it was crucial for Chithyola Banda to approach spending cuts with a focus on minimising harm to vulnerable populations while ensuring fiscal prudence.
“One area that warrants attention is the rationalisation of administrative expenditure. The government could streamline non-essential travel, workshops and allowances, which have historically constituted a substantial portion of recurrent expenditure.
On his part, Blantyre-based economist Marvin Banda said Chakwera should have announced the austerity measures himself, naming top people who would have to give up their spending.
“The minister finds himself stuck between a rock and hard place (scylla and charybdis). It’s a tough ask for austerity measures to be implemented midway through the fiscal year, especially considering that the budget was derailed partly due to the implementation of statutory and social fiduciaries the government owes to its citizens,” Banda said.
National Advocacy Platform Chairperson Benedicto Kondowe said Chakwera fell short of demonstrating leadership on austerity.
“He should have announced high-level measures, including those applicable to his office, rather than delegating all the responsibility to the Minister of Finance,” he said.
On his part, Centre for Human Rights and Rehabilitation Executive Director Michael Kaiyatsa said austerity measures had proven to be ineffective in the past.
According to Kaiyatsa, there must be accountability and monitoring mechanisms to assess their impact.
“To date, no audit has been conducted on the effectiveness of these past measures,” Kaiyatsa said.
Meanwhile, the Ministry of Finance has shifted the presentation of the mid-year budget review statement from this morning to Wednesday next week.
Chithyola Banda told The Daily Times that the move was aimed at accommodating the new austerity measures directed by Chakwera on Wednesday night.
