Malawi government is expected to collapse once it finishes using the foreign exchange it had stored in its reserve if donors fail to resume with aid by end of this year.
In June this year, Reserve Bank of Malawi (RBM) disclosed that it was holding forex reserves of up to US$750 million, the private sector had US$300 million while commercial banks were keeping US$10 million in forex stocks.
The country has been consuming the foreign exchange from its reserves without finding other means of pumping back.
The current depreciation of the Kwacha has been coupled with the sale of tobacco but surprisingly there has also been an increase in depreciation and economic instability.
The development has angered opposition Umodzi Party (UP).
In an interview with Malawi24, UP leader Professor John Chisi said government should understand that it has not generated forex from this year’s tobacco sales and donor aid is the only means of sustaining the country’s economy.
This year’s tobacco sales earned the country US$300 million down from US$362 million last year following poor sales and reduced prices.
According to Chisi, the only alternative to resuscitate the economy is through donor aid.
He attributed the drop of Kwacha to the arrogance of ruling Democratic Progressive party (DPP) and its failure to engage donors.
“Malawi has no ability to create things and manufacturing base. To get the needed services the country depends on donor support. Over the years donors have kept on assisting.”
“Despite the excessive loans that the country has failed to pay back donors were still assisting. They have been giving in 40% budgetary support. This 40% was forex and it is the same that was used to pay civil servants,” stated Chisi while warning that the country will soon collapse.
The UP president has also called on Minister of Finance and Economic Planning Goodall Gondwe to withdraw the statement he made on one of local Televisions.
Gondwe was quoted as saying that Malawi will never have an improved economy if the weather is bad again this year.
“The finance Minister has categorically openly told the nation that donors are not coming. That we will never be guaranteed of improved economy if we don’t have good weather. Can government really depend on weather to look after its people?” questioned Chisi.
Tobacco volumes have been reduced this year as a result of heavy rains and floods that hit most green gold producing districts in January.
This has highly contributed to staggering of the country’s economy and to the depreciation of local currency.