Finance Minister' s Challenges

Our new finance Minister takes a task with many challenges. The first of these is taking over from a Minister who rightly or wrongly accredited with extremely impressive economic performance. He will have to maintain that level of performance. Any slippage will be blamed on him, even it is caused by factors beyond his control..

The second challenge is establishing his own standing in the financial world. In today’s world Both the need to attract aid money and the need to “signal” international financial institutions have increased the role of economists certified by international organizations. One is supposed to be ~former IMF official”, “Harvard trained economists” etc. You ought to be able to throw around such expressions “sound macroeconomic policy”, “prudent fiscal policy” “good governance” with natural ease. It also helps to have the right label. The labelling of Africa politicians for Western consumption is fascinating. Bingu whose career was mainly in the UN and African regional organisation became the “former IMF or World Bank official” and of course Gondwe had the perfect credentials. Our finance Minister who for domestic consumption is labelled as the nephew of Dr. Banda, or as head of Blantyre Newspapers and Print and National Food Reserve Agency now appears as “a former UNICEF financial consultant” (Reuters). Presumably this enhances his status as finance minister although it is difficult to see the link. Until quite recently, UNICEF was a staunch critic of the folks from Washington. Our new Minister might find it wise to stress he is from the private sector. Although the current crisis has tarnished the image of auditors, he should also highlight the fact that he worked for the renowned international auditing firm KPMG. He should not worry too much about such questions as the relationship between auditing and macroeconomics.

The third challenge will be around the issue of devaluation. One fatal blunder Gondwe commited just before the elections was his statement that devaluation was then politically impossible, given the then forthcoming elections. The impression he gave was that devaluation would be seriously considered only after the election. It is likely that this indiscretion cost him the ministry and this may be the point Bingu was making when he talked about the importance of “secrecy” in government affairs. Gondwe-s indiscretion may have simply encouraged speculation against the Kwacha. Whatever is the case, the President has promptly dismissed the prospect of devaluation. We do not know where Kandodo stands on the issue. He has yet to visit the Hole for a chat. Malawi businessmen seem to favour devaluation and he will surely hear a lot of it in the financial circles he will now be moving in. Donors and NGOs love devaluation because it makes their money (including their personal incomes) go a long way. He will soon or later have to have a position.

The final challenge is reminding the President of the fiscal constraints within which the government is operating. This can be a hazardous task. It cost Aleke Banda 12 years in jail when told third. Banda the national coffers could no longer afford his profligacy and that Tembo then at the Reserve Bank told him so. Confronted by Kamuzu Banda, Tembo swore he had never told Aleke such a preposterous thing. Aleke ended up in jail, labelled as “wa bodza leni leni”. That also marked the beginning of the Malawi economy since to meet Dr. Banda’s increasingly bizarre demands (the New State House, costly entourages of Mbumbas etc) investments in crucial sectors – infrastructure, education --- had to be cut sharply.

On the positive side, our President understands the economic problems and the international environment. In addition mining will be adding US$30 million to the national coffers from next year and double as much a year after.