Chakwera is flip-flopping on his own austerity measures

Malawi President

In November, 2023, Malawi’s President Lazarus Chakwera decided to ban his government from traveling abroad, a measure he also applied to himself, to help his country cut spending and cope with the economic crisis.

The decision was announced after the International Monetary Fund (IMF) approved a $175 million loan to Malawi. We really need to cope with the economic crisis on a serious note.

Chakwera imposed a freeze on all state-funded foreign travel for all government officials at all levels until the end of the fiscal year in March, 2024.

Chakwera, therefore, did not attend the COP28 climate summit scheduled for November 2023 in the United Arab Emirates.

That was indeed commendable and I applaud the President for that decision he made though it came very late after people had exhausted their opinion on the same matter.

I believe that there’s also need to freeze on all local-funded travel for all officials at all levels as well if Malawi is serious with recovering from this economic crisis.

However, I have a problem seeing President Reverend Lazarus Chakwera always on the move within the country instead of being in his office working.

Government is still spending highly due to local flights of the President who would like to attend each and every function even where he is not needed.

Shortages – or the risk thereof – cause prices to explode. If consumers save on energy, this will help to keep prices down. More generally, cutting spending will prevent the economy from overheating – and thus inflation – if there are bottlenecks on the supply side.

Without budget reforms, government debt will rise continuously as a share of GDP in coming years, which will precipitate an economic crisis at some point. Rising debt and deficits are already contributing to inflation and are likely undermining economic growth.

If government spends less than it collects in revenue, there is a budget surplus. In the recent past years, government has over spent and continues to over spend trillions of Kwacha, which is more than it collects (revenue), resulting in a deficit. If you check government spending you will see how the deficit and revenue compare to government spending.

The IMF provides financial support to countries hit by crises to create breathing room as they implement policies that restore economic stability and growth. It also provides precautionary financing to help prevent crises. IMF lending is continuously refined to meet countries’ changing needs.

The International Monetary Fund’s executive board approved a loan of about $178 million for Malawi, with an immediate disbursement of about $35 million, the IMF said in a statement on November 15, 2023.

Paradoxically, Malawi remains one of the poorest countries in the world despite receiving project loans and international aid which respectively accounted for 10% and 1.4% of GDP in 2022-23, and its peaceful existence since independence in 1964. In 2020, some 73.5% of the population lived on less than $1.9 (PPP 2011).

Many policymakers believe that cutting government spending would hurt the economy, but they are mistaken. Retaining more resources in the private sector would be a net gain for the economy because markets have mechanisms to allocate resources to productive uses, whereas government allocations are guesswork.

Cuts in public spending, on the other hand, can lead to more private investment, and faster growth. Fiscal expansion boosts aggregate demand and leads to an economic expansion; a fiscal squeeze leads to a slowdown.

If government spends more than it collects in revenue , then there is a budget deficit. If government spends less than it collects in revenue, there is a budget surplus. In the recent past years, government has spent and continues to spend trillions of Kwacha, resulting in a deficit.

Without budget reforms, government debt will rise continuously as a share of GDP in coming years, which will precipitate an economic crisis at some point. Rising debt and deficits are already contributing to inflation and are likely undermining economic growth.

Chakwera’s flight to DRC

Fast forward, on Friday, 19 January, 2024, barely a month after the austerity measures were announced, President Reverend Lazarus Chakwera left for the Democratic Republic of Congo (DRC) for the inauguration of that country’s President Felix Tshisekedi and “urgent in-person talks” on security matters relating to Malawi troops on a peacekeeping mission. The President’s trip comes at a time a foreign travel ban he imposed last November, 2023 as part of austerity measures to bring the economy back on track. He had indicated that if there were no pressing issues, he would not travel until March this year.

Minister of Information and Digitisation Moses Kunkuyu confirmed the President’s trip in an interview and justified it as crucial. He confirmed that the President travelled to Kinshasa, DRC to hold bilateral talks with Felix Antoine Tshisekedi, President-elect of DRC, on the sidelines of his inauguration, scheduled to take place on 20th January 2024.

An information minister (also called minister of information) is a position in the governments of some countries responsible for dealing with information matters; it is often linked with censorship and propaganda. Sometimes the position is given to a separate Minister of Culture. Therefore, the Minister of information should not be taken seriously because he might be linked with propaganda to simple defend the President.

President Chakwera is always undecided. Indecision can lead to a lack of accountability among employees. When managers are unable to make decisions, it can be difficult for employees to take ownership of their work. This can lead to a lack of accountability and a lack of ownership over projects, which can ultimately harm the company’s overall performance.

Indecision may also have a negative impact on Malawi. Brooks (2011) speculates that indecision may result in the foregoing of good options when decision-makers seek optimal options before they decide. Charan (2001) argues that a culture of indecision in an organization results in poor strategic execution.

Many Malawians believe that Chakwera pretends to believe something that he does not really believe, or that is the opposite of what he does or say at another time: There’s one rule for him and another rule for everyone else and it’s sheer hypocrisy. Hypocrisy may set a negative example for others, enabling people to avoid the conflict between self-interest and moral standards and threats to their moral identity, thereby resulting in moral disengagement and hypocritical behavior.

Austerity measures

First, austerity measures are considered harsh economic policies intended to reduce the government’s budget deficit. These policies can include reductions in government spending and increased taxes. Austerity measures are commonly used with contractionary fiscal policy or when a government faces debt default. They also mean harshness, strictness, asceticism, or rigor. They are a set of economic policies, usually consisting of tax increases, spending cuts, or a combination of the two, used by governments to reduce budget deficits.

Secondly, Austerity measures are implemented to avoid debt crisis. These assist a country in tracking the expenses of the government, controlling them and regulating new policies in the annual budgeting. However, Opponents argue that austerity measures depress economic growth and ultimately cause reduced tax revenues that outweigh the benefits of reduced public spending. Moreover, in countries with already anemic economic growth, austerity can engender deflation, which inflates existing debt.

What are the disadvantages of austerity? Austerity measures are implemented to reduce government spending and shrink the budget deficit. Austerity policies include tax increases and government program cuts. Austerity measures may result in a decline in available social services and a reduced individual disposable income.

Finally, I personally support the introduction of austerity measures but the challenge with Chakwera and his administration lies in the failure to implement those measures.

The implementation of austerity measures is an indication that any government is willing to take some action to repay the overbearing debt. This may encourage the lenders to lower the rate of interest applied on the debt. Austerity could also reduce reliance on borrowing. Reducing the budget deficit – this is money that a government has agreed to spend but does not have. Can improve overall confidence in the economy and increase private investment.

The failure to implement austerity measures is an indication that Chakwera is unwilling to take action to repay the skyrocketing debt as well as lack of vision in improving the economy.