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The Consumers Association of Malawi (CAMA) says the Extended Credit Facility (ECF) approved by the International Monetary Fund (IMF) is intended to support the Malawi government’s commitment to economic reforms, but the country “still faces a challenging macroeconomic environment”.
Therefore, the consumer watchdog asked the government to update the implementation of the ECF, as several economic factors have led to “unsustainable domestic and foreign borrowing and the adverse impact of multiple external shocks, which continue to widen macroeconomic imbalances, including the chronic balance of payments”.
In a public statement issued today (August 8), CAMA Executive Director John Kapito stressed that the main objectives of the ECF are to address “macroeconomic stability; creating a low or moderate inflation environment; stabilizing the exchange rate; and laying the foundations for inclusive and sustainable growth, among others.”
“However, despite the approval of this expanded credit line, we still see that the government is still struggling to sustain growth and reduce poverty and food insecurity,” CAMA said.
“During the application and approval of this stimulus package fund, the people of Malawians were informed that once the fund was approved, the foreign exchange shortage and other economic challenges affecting the economy would stabilise.
“However, after the implementation of the ECF, the market still faced problems such as foreign exchange shortage, rising prices of goods and services, and the closure of some businesses, which brought serious negative economic challenges to consumers.
“Consumers are currently facing significant economic challenges such as the continued high cost of living, we are seeing a continued depreciation of the kwacha, rising prices of goods and services, high bank interest rates, and a lack of foreign exchange across all banks – this has led to the growth and expansion of parallel financial markets.”
Capito described these negative developments as “economic coups due to financial instability, which pose serious challenges, have negative consequences and raise serious questions about the effectiveness and success of the European Monetary Fund.”
“The lack of information from the government or the Treasury has led to a lot of panic and uncertainty among consumers as they can see no end to the current economic challenges they are facing.
“The government still faces serious challenges in maintaining the supply of essential public goods and services such as health care, food security, and road infrastructure.
“At the same time, the government continues to borrow from domestic and foreign financial institutions, which puts further pressure on the exchange rate and prices of goods and services in the market.
“We therefore request an update from the Ministry of Finance and Economic Planning on the implementation of the ECF and any other economic reforms being undertaken by the government.”
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