The main opposition Democratic Progressive Party (DPP) has said Malawians should prepare themselves for the unbearable conditions which will have severe and terribly dire consequences ahead, following the country’s staff-level agreement with the International Monetary Fund (IMF) on a four-year Extended Credit Facility (ECF) program valued at US$174 million for over a four-year period.
A statement signed by the party’s spokesperson Shadric Namalomba said the program raises concerns among Malawians about the potential impact of the accompanying conditionalities.
“The Malawian economy under the Tonse Administration faces challenges like low growth, poverty, and fiscal inefficiency. The ECF program aims to alleviate these issues with financial. assistance. However, inevitably the conditionalities, which may involve fiscal consolidation, reduced public spending, and structural reforms to boost economic competitiveness, profess doom for Malawi.
“Government expenditures will be aligned to revenues collected meaning that suppliers of Government are at risk of not being paid for their services. Already, IMF has noted that Government is defaulting on its creditors. This is therefore likely to persist and will result in the increase of Government arrears.
“Government projects countrywide are also likely to stall as Government will be unable to pay contractors; meaning that construction of health centres, classroom blocks and other structures will stall for the next four years of the ECF program.
“Monetary policy during the period of the program will aim at positive real interest rate; meaning that the policy rate will be raised above inflation. This will entail that interest rates in the country will soar, making all loans extremely expensive, which will translate into high production costs and soaring prices of all basic commodities.
“Exchange rate will be guided by forces of supply and demand of foreign exchange in the market; meaning that Malawians should brace themselves for major devaluations in the horizons. This will make all imported items such as fertilizers, petroleum products and other raw materials expensive, which will in turn make all other goods and services in the economy soar,” he said
He added that the future is simply dark, bleak and gloomy.
“The average Malawian will immediately feel the effects of these actions, especially those who heavily rely on government services and subsidies. The already impoverished population could face higher prices and higher living expenses as a result of tariff changes and subsidy reductions. Additionally, decreases in public spending may lead to less investment in vital industries like healthcare and education, further putting a strain community with weaker economies. on the livelihoods of
“Growth will be subdued, poverty will worsen, and hunger will persist. While the Tonse Alliance thinks that economic conditions will improve in the country with the signing of the ECF program, the truth is that conditions will have to worsen in the next two to three years before improvements can be seen if Government will stick to these tough prescriptions,” Said Namalomba
The DPP hopes that alongside the program, Government will implement necessary measures that will cushion the majority of the low earners from the effects of these tough policy measures. In preparing for the challenges ahead, Government of Malawi should focus on developing strategies to mitigate potential negative impacts. Civil society organizations, community leaders, and. grassroots initiatives should be encouraged in advocating for the protection of the most vulnerable groups and ensuring that essential services are not severely compromised.
Additionally, he said efforts should be made to diversify the economy, promote local entrepreneurship, and create alternative sources of income for those affected by the conditionalities.
