Africa-Press – Malawi. The depth of the well is always appreciated when drained. This is exactly happening at Malawi Central Bank-Reserve Bank of Malawi (RBM) immediately when President Lazarus Chakwera’s Tonse Alliance government removed Dr. Dalitso Kabambe as Governor over political inclination while deserting prudent monetary policy agenda the latter instilled in the bank.
Three years down the line since 2020, after Dr. Kabambe was removed from RBM, the bank has lost its monetary policy direction despite several desperate attempts to align itself with the International Monetary Fund (IMF), World Bank and other financial institutions’ monetary discipline and policies.
Chakwera’s Tonse Alliance government could have waited a bit for proper leadership transition before sacking the intellectual and monetary figurehead of Dr. Kabambe at the Central Bank.
RBM is struggling currently due to amateurish and experimental approach of monetary policy. Ukraine and Russia war, climate change and weather shocks and COVID-19 remain an excuse for the current ailing economy while previous regime managed to contain the monetary disarray.
The bank is failing to maintain inflation, exchange rate stability, and foreign exchange reserves cover for the past three years. In a desperate attempt to source forex, RBM in January this year auctioned the Malawi kwacha against major currencies which ended as a flop and shameful.
The nation is unable to have forex for buying essential commodities, including farm inputs, fuel and medical supplies. This has ended the country having debts up to MK6.38 trillion, surpassing national budget, which is pegged at MK3.87 trillion just three years Chakwera took reins of power in June 2020.
In his 2023/2024 National Budget presentation at Malawi Parliament on March 2, 2023, Finance Minister Sosten Gwengwe admitted how the country’s inflation has failed to go down.
“To contain inflationary pressures, the Reserve Bank of Malawi (RBM) adjusted its Policy rate from 12.0
percent to 14.0 percent in April 2022 and to 18.0 percent in October 2022. In response, the average lending rate moved in sync with the Policy rate adjustment, rising from 18.0 percent to 19.3 percent in May 2022 and to 22.6 percent in November 2022.
“In February 2023, in anticipation of a more favorable outlook for inflation, the RBM held its policy rate at 18 percent. Foreign Exchange Reserves,” admits Gwengwe.
The minister added, “Madam Speaker, foreign exchange reserves remain remarkably low as need for imports far out paces the exports. To boost the foreign exchange reserves, the RBM implemented a surrender requirement of 30 percent of exports and, in May 2022, devalued the Malawi Kwacha. Let me assure the House that Gross official reserves are expected to recover to above 3 months of import over the medium term”.
On debts Gwengwe could not also hide, “Allow me to appraise the House on how our debt currently stands. As at end- December 2022, Total Public Debt reached MK7.90 trillion or 69.93 percent of GDP. Out of this stock, MK4.43 trillion is domestic debt while MK3.47 trillion is external debt.
“Compared to end-March 2022, total Public Debt Stock amounted to MK6.38 trillion, representing an increase of 23.8 percent; mostly out of issuance of treasury securities to finance budget deficits and refinancing of old maturing debts”.
However, the current Tonse Alliance government will not appreciate the role former governor Dr. Kabambe played at the bank over the political eye of being with opposition Democratic Progressive Party (DPP), which total wrong and naïve.
This is what Dr. Kabambe attained at Reserve Bank of Malawi (RBM) as governor on prudent monetary leadership;
1.Achieved single digit inflation within one year of work from 24% in January down to 7.1% by December 2017 and maintained single digit average inflation throughout the tenure.
2.Maintained stable exchange rate for the Malawi kwacha at MK732 to a dollar throughout the tenure
3.Raised the country’s foreign exchange reserves from less than 2 months of import cover or US$389 million to over 6 months US$1.4 billion.
4.Reduced the policy rate from 24% down to 13.5% within 2 years.
5.Reduced Non Performing Loans (NPL’s) for Banks from 19% to 4% within 2 years.
6.Improved private sector lending from negative to 19% across the board from Banks, MFI’s and Saccos.
7.Improved RBM profitability from a projected K4 billion loss in 2017 to a surplus of MK21 billion by year end and a further surge in profits to a record of MK57 billion in 2019, a record no other RBM Governor has ever achieved.
8.Pushed up the country’s remittances from US$36 million in 2017 to US$250 million in 2019.
9.Successfully implemented the ECF program with the IMF throughout the period.
10.Improved the performance of the Malawi Stock Exchange in all its indicators.
Now, Dr. Kabambe is vindicated while still standing as one of the country’s successful Malawi Central Bank Governors, the nation has ever had with credible monetary policy. Malawi needs the caliber of Dr. Kabambe with sound monetary policy skills to turn fortunes at the central bank without political eye.
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