GOVERNMENT HALTS PRICE RISES
Wow - clap, clap, clap! Have these price control measures ever worked anywhere? There are countless examples to the contrary, yet here we are.
The exchange rate set by the Reserve Bank of Malawi (this is a whole different topic) coupled with a de-facto fuel price cap (regulated by the energy regulator MERA), has resulted in increasing fuel shortages. If such subsidies (which is what these essentially are) are not sufficiently financed, economics 101 dictates a shortage on the supply side, as experienced in both the lacking forex- and fuel supply in Malawi.
Much of the donor goodwill has been exhausted and loan facilities are drying up with the realisation that they can not be serviced or paid back. The recent suspension of USAID projects in Malawi - a result of a recent Trump Executive Order - is not helping - a grim realisation of what it means to be dependent on the goodwill of others.
One could see this as a clutching at straws by the Malawi executive government. The whole country is in a desperate situation and this is an election year, adding to the pressure for the executive. Without the financial muscle, the vote of the electorate cannot easily be bought and the naked facts bubble to the surface, despite the ongoing political rhetoric of explanations and excuses.
Meanwhile everyone is facing rising prices in this dire economic outlook. The low income population is affected the hardest, where any disposable income quickly evaporates. Government is looked upon as a saviour, while this is arguably the source of the problem. Politicians responds with popular decisions, which invariably worsen the situation for the people. For reference: The GPD per capita in Malawi is somewhere at USD 1-2 per day, which is amongst the global bottom.
If all this does blow up in time for the elections in May (unlikely, but possible), there is no real viable political alternative. The problem is systemic, deep rooted and has been growing over many decades. There is no easy fix available - the solution can only come from the people with a unified will, effort and most of all: a need. Unfortunately things are likely to get worse, before they get better - we have not hit rock bottom yet. We are very resilient!
#pricecontrols
#forex
#fuelcrisis
#malawi
#trump
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