Malawi’s new President, Joyce Banda, becomes the second African woman head of state after Liberia’s Ellen Johnson Sirleaf. It has been a hard climb to the top in a largely male-dominated society but once there, she immediately showed she is her own person with a series ofbreathtaking changes, including the devaluation of the currency. Lameck Masina reports on a hectic month in Malawi.
Malawi’s new President, Joyce Banda, has lost no time in putting her own stamp on government and policy. In less than a month since she succeeded the late Bingu wa Mutharika on 7th April, she has reversed many of his policies and moved or dismissed several key government officials, including the governor of the Reserve Bank, Perks Ligoya, who has been replaced by former telecoms CEO Charles Chuka. She also dismissed the police chief, Peter Mukhito, who had been widely accused of overreaction during anti-government riots which led to 19 people being shot dead, and she also fired the Information Minister, Patricia Kaliati.
However, perhaps her most significant change was to devalue the Malawi kwacha by about 33%. The devaluation comes in the wake of acute shortages of fuel, cement and foreign currency in the country and consistent pressure from the IMF to do so. The shortages are believed to have been caused by the withdrawal of aid from the UK and US.
The former President, Bingu wa Mutharika was dead set against devaluation, arguing this would raise prices and fuel inflation and, against the advice of the IMF, he continued to subsidise fuel and agricultural inputs such as fertilisers. Mutharika had thumbed his nose at the IMF several years ago when he offered farmers input subsidies to grow food. This move changed Malawi from a nation dependent on food imports and aid to an exporter of maize.
At the time of going to press, news of the devaluation was greeted by shoppers, fearful of huge price increases, going on panic buying sprees to stock up on basics. Many shops in Blantyre reported that they had run out of staples such as sugar, cooking oil, maize flour and bread. Some shoppers were convinced that storekeepers were hoarding food in the expectation of making large profits by increasing prices.
The central bank announced that the US dollar would now be worth 250 kwacha instead of the former peg of 168 kwacha. The devaluation also opens up the foreign exchange market with exporters allowed to credit foreign exchange earnings into their own commercial bank accounts instead of depositing them with the central bank. Tourists will be allowed to settle their bills either directly using hard currency or in kwacha, having purchased the local currency using their foreign exchange.
The main aim of the devaluation is to close the gap between the official exchange rate and the black market rate, discourage imports by making them more expensive and encourage export earning in kwacha terms.
The Reserve Bank governor stated that he hoped the devaluation would lead to a better agreement with the IMF and that the suspended donor monies would be reinstated. Malawi relies on foreign aid for 40% of its national budget. Finance Minister Ken Lipenga said that the absence of budget support from donors had created a budget gap of $121m in the current fiscal year, which ends in July. The programmes, which Britain and the US had frozen, were worth nearly $1bn.
Aid flow reduction started soon after Mutharika’s government expelled the British envoy to Malawi, Fergus Cochrane-Diet, over his leaked cable to London, published in a local daily newspaper, in which he accused Mutharika and his government of being “ever more autocratic and intolerant”.
Problems bigger than expected
“The problems I have inherited [from my predecessor] are bigger than those I used to see before I became the country’s President,” said Joyce Banda in Mtunthama Palace in the capital, Lilongwe. “I have realised that I have really a huge mountain to climb.”
Joyce Banda’s rise to the top, which took many observers by surprise, began when Mutharika shocked the generally male-dominated society by naming her his running mate during the 2009 elections. She was appointed Vice-President in Mutharika’s cabinet but clashed with him when she refused to support his plans to make his brother Peter Mutharika the President when he came to the end of his term in 2014. Banda was kicked out of the ruling Democratic Progressive Party but could not be dismissed from government. She was subjected to a campaign of abuse and was dismissed by Mutharika’s widow, Callista, as nothing more than a market woman. “How can a mandasi (fried cakes) seller become president?” she scoffed.
Instead of throwing her off balance, the remark inspired her. “Yes, I am indeed a mandasi seller and I am proud of it because the majority of women in Malawi are like us, mandasi sellers.” Her response endeared her to many who believed the leadership had lost touch with the people. Callista Mutharika, who was head of the country’s safe motherhood programme, has been relieved of her duties.
Banda began talks with the IMF soon after taking office in a bid to unlock donor funds frozen over the past year. She has intensified talks with the US Millennium Challenge Corporation (MCC) which suspended $350m meant to improve Malawi’s ailing energy sector. The MCC funnels US aid to countries with records of good governance and respect for human rights.
“On my part, I pledged that Malawi will resolve the issues that led to the suspension of the MCC. I particularly pledged that we want to restore rule of law and democratic principles in our country, respect for human rights and freedoms as guaranteed by our constitution, and to demonstrate good governance, especially economic governance,” she said.
President Banda has also successfully persuaded Britain to resume full diplomatic relations with Malawi, raising hopes of a resumption of its annual $19m budgetary support. She sent a new Malawi High Commissioner to Britain to replace the one chased out by the British authorities in retaliation to Mutharika’s deportation of their High Commissioner.
Meanwhile the head of the African Development Bank, Donald Kaberuka, said that he is willing to provide $45m in budget financing for Malawi to help new President Joyce Banda revive the struggling economy. This was a response to Banda asking the bank to consider assisting in resuscitating the country’s ailing economy.
“Now that they are having very constructive discussions with the IMF, I am prepared absolutely to support Malawi as they resume the reforms, which were doing so well some time ago. I am confident Malawians are doing the right thing and we want to support them. This will be $45m in two tranches. I am considering front loading this first tranche to support the currency realignment and to make the next tranche a floating one,” he said. The 62-year-old President Banda has re-established healthy relations with neighbouring countries, which had turned sour during the reign of her predecessor. These include Zambia and Mozambique.
Zambia’s President Michael Sata donated 5m litres of fuel to assist during Mutharika’s funeral while Mozambique’s Armando Guebuza donated 10 cows and 45 litres of diesel. Most recently, South Africa has assisted Malawi with a loan of R270m ($34m) to be used in importing fuel. However, unlike her predecessor, who, in March, days before his death, asked donors to give him 12 months to solve the country’s economic problems, President Banda said that it would take her 18 months to solve the economic problems facing the country.
While President Banda has mended fences with neighbours and international partners and resumption of budgetary support and donor financing is likely to follow, citizens are asking for longer term policies to end Malawi’s dependence on donors.