Going Off the Rails
Lilongwe – Projections that Malawi’s economy could grow by 5.5 percent this year might be thrown off-track by unbudgeted increases of civil servants’ salaries.
A fortnight back, civil servants went on a 10-day strike to push for better salaries.
The result was a huge 61 percent increment, while there are negotiations to also improve salaries and perks for judicial officers.
Judges also want a 61-percent salary increment, as well as an upward revision of their subsistence and fuel allowances, and their retirement packages.
In addition to this, the country’s 193 Members of the National Assembly want the government to pay them outstanding fuel allowance arrears they say date back to a 2008 agreement.
The MPs are supposed to get 500 litres of fuel per month, meaning the government owes them millions – which the MPs want paid immediately.
The Parliamentarians have threatened to block all government business in the House if their demands are not met.
Add to that growing criticism for the unpopular devaluation of the local currency (at the behest of institutions such as the IMF), the kwacha, and analysts believe the honeymoon of goodwill is effectively over for President Joyce Banda’s government.
In the 10 months that President Banda has been at the helm, the kwacha’s value has fallen from K167 to the US dollar, to K400 for US$1.
The result has been a worsening of the already bad fuel supply situation and now the Fuel Pricing Committee at the Malawi Energy Regulatory Authority is thinking of pegging the price of a litre of petrol at around US$2.
The tight fiscal situation saw Finance Minister Ken Lipenga announcing that the government had withdrawn its revised US$1.32 billion 2012/2013 budget, which was presented to Parliament just two weeks ago.
This is to allow for adjustments to be made to the expenditure bill.
Three weeks ago, Minister Lipenga adjusted the budget upwards by 16 percent from US$1.13b to US$1.32b. And now another adjustment is coming to accommodate the civil service salary changes.
“These developments must be reflected in the revised budget,” he told Parliament.
After President Banda turned down a Parliamentary Service Commission proposal to increase MPs basic pay by 137 percent last year, the MPs have retaliated by demanding the fuel allowances approved by her predecessor, President Bingu wa Mutharika.
President Banda responded: “The economy of Malawi is in a mess and MPs should not expect to receive K10 million each because there are a lot of people living in desperate conditions and need the money more.”
The civil society umbrella body, the Human Rights Consultative Committee – which was influential in stirring anti-government protests that sought to put President Banda in office before President Mutharika’s death – has come out in support of the MPs.
“If the demand is justified and legitimate why not pay them,” said committee chair, Undule Mwakasungula.
He, however, added: “Let them continue to discuss on their perks with the executive while they are discussing and passing on important Bills which will improve the welfare of Malawians.
Mwakasungula appealed to President Banda to stop politicising the issue.
Malawi’s donors, through the Common Approach to Budget Support (CABS), warned of a big economic crisis.
CABS chair, Ambassador Peter Woeste of Germnay, said in Lilongwe that people should not exploit current problems for quick gains “be it in Parliament or on the streets”.
He said they were optimistic economic growth would rebound due to the devalued currency and a good harvest of the staple maize crop.
Donors represent a powerful group in Malawi’s politics and economy, supplying around 40 percent of the national budget through CABS.
When President Mutharika had a row with Britain in the last months of his reign, they immediately pulled the plug on budgetary support.
Almost overnight, the country experienced foreign currency and fuel shortages, paving the way for street demonstrations that resulted in some 20 deaths, as police opened fire on civilians.
President Mutharika tried to implement an austerity budget that was independent of donor support.
However, on his death President Banda dumped the self-reliance approach and restored ties with donors.
While aid flows resumed, soaring prices have pushed inflation to 33.3 percent in December 2012, far higher than the year-end forecast of 18 percent.