CAMA PETITION Petition to Her Excellency the President Through Secretary to Cabinet Lilongwe 1.

STOP THE FLOATATION OF KWACHA Devaluation and Floatation: The wrong policy sequencing The recent policy reforms reflect very poor policy sequencing. The need to deval ue the local currency was a policy that all sectors of the economy did not objec t to though the repercussions of such a reform were known to be punitive and for Malawian workers , after the announcement of the devaluation they went out dema nding adjustments to their salaries and wages and in some instances caused disru ption of services, These are the challenge that our authorities created in their failure to sequence the devaluation of the Malawi Kwacha and the Floatation of the local currency. We strongly believe that floatation of the Kwacha should hav e been done only after certain conditions were achieved such as adequate foreign reserves, this is also supported by the International Monitory Fund (IMF) defin ition of a flexible exchange rate system which recognizes the necessity for the authorities to intervene in order to defend it against speculative attacks and t o prevent a free fall in the value of domestic currency relative to foreign exch ange. This requires that a country should adopt such a floatation regime only if it has enough reserves to facilitate such interventions. The adequacy of reserv es is a necessary and sufficient condition for currency floatation and Malawi ha d no such reserves to warrant the floatation of the Kwacha. Malawi should have started by addressing the problem of a perpetually precarious foreign reserve position before adopting a flexible or floating regime. Further more it is a well know fact that Malawi had accumulated a lot of foreign payment arrears and that authorities needed to clear the foreign payments before embark ing on a free exchange rate as most importers were desperate and panicking to ex ternalize their arrears when foreign exchange became available. It is strange th at we continue to believe that we can manage a flexible exchange rate system whe n even the IMF predicts that foreign reserves will not exceed an average of 1.2 months of import cover even by 2013. It is equally strange that the authorities consider their duty to defend the domestic value of the kwacha as virtuous, but choose to default on their role to defend the kwacha's value on the foreign mark et, considering the latter to be a private matter that should face the full blun t of market forces which do not exist Thus, our policy makers are focusing on the easy thing of devaluing and floating the domestic currency regardless of the stance of the economy, but not the real thing which should come first. (creating conducive environment for such an exch ange rate regime before it is implemented) Some will argue that the ongoing challenges are short-run effects of the policy reform, which will be self corrected in the long-run. But that requires that we should have a clear understanding of these effects and how they will be correcte d. In terms of the exchange rate reforms - which are at the centre of the ongoin g mess - the usual premise is that imports will be reduced and exports will rise as the value of the kwacha relative to foreign exchange declines. But that argu ment assumes that our imports and exports should be sensitive to the exchange ra te. In turn, this further requires that imports should have alternative domestic substitutes which then become less attractive relative to imports and that expo rts should have an alternative domestic market so that domestic sales are reduce d in favor of exports, these dynamics are completely out of the picture in Malaw i. In Malawi a number of papers have revealed that imports are not sensitive to the

exchange rate even at the moment when the exchange rate has depreciated drastic ally, imports are still rising due to lack of substitutes which means all effect s of the exchange rate are passed to the consumer by the importers. Since the cu rrency flotation of 1994, the private sector's contribution to foreign exchange has remained flat, further suggesting that exports are irresponsive even over su ch a long period. Similarly, our imports are dominated by necessities such as Fa rm Inputs, Pharmaceuticals, Petroleum Products, as well as raw materials and int ermediate inputs for industrial use and the argument that controlling luxury imp orts which only accounts to about 15% of total imports does not hold . This lack of a trade balance response to the exchange rate reflects short-run co nditions which, unfortunately persist in Malawi. It is wrong to plan an economy' s interaction with the rest of the world based on begging and on a few months of relief arising from the precarious sale of one only commodity on the internatio nal market - where the country is a price-taker and both the sales and prices ar e under an intense anti-smoking lobby. Such an economy cannot claim to be in ste ady state, and implementation of policy reforms that characterize the long-run c annot be justified. It is completely wrong to force equilibrium conditions in an economy that is clearly stuck in the short-run. Neither the underlying theory n or the empirical evidence support such an approach and the desire to cling to po licies that cannot work such as the floatation of the Kwacha does not hold water (A)Without any foreign exchange reserves what is the Kwacha floated against? (B)Without any working current policies to go into the export market what measur es are in place to support the floatation of the kwacha in the short and medium term? (C)The free fall of the kwacha would force most of the local industries to close as demand for their products drastically will be reduced (D)There will be more retrenchments as most of the Industries will fail or find it hard to sell their commodities on the local market as prices will be unafford able. (E)There will be increased unemployment as most industries will relocate to mark ets that are stable and where demand for their products is high (F)There will be no new Foreign Direct investment in the short and medium term d ue to the continued unreliability of exchange rates the and high bank interests es (H) There will be more strikes and labor unrests as disposable incomes continue being eroded which will discourage Foreign Direct Investment In a nutshell, no amount of Bank rate increase will correct the current situatio n, because it entails wrong treatment to a clearly self-induced infection whose cure is on the open shelf which is a reversal of the currency floatation. WE ARE THEREFORE PROPAGATING THE REVERSAL OF THE FLOATATION OF KWACHA 2. PRESIDENTIAL AND CABINET TRAVEL The current austerity measures in Malawi have created a number of challenges to all Malawians and the most affected are the lowly paid workers, the unemployed a nd the rural poor Malawians .The Government has informed all Malawians to tighte n belts as the economy goes through this difficulty phase and at the very same t ime coming with a number of measures to cushion the impacts. However it has been observed that while the consumers are required to go through the hard economic rat

conditions both the President and her cabinet continue to spend the very same re sources carelessly in both foreign and local trips with entourages that do not a dd value to the current economic conditions The President, Her Vice and the entire cabinet have insulated themselves from th e current economic challenges through the many foreign and local travels which a re disguised as developmental engagements where huge sums of money are used to p ay for both allowances and cost of travel. The reduction of the Presidential Salaries are negligible and unwarranted as com pared to the huge costs that are incurred through travel allowances We are therefore demanding and requesting the President, her Vice and Cabinet Mi nisters to immediately reduce or stop such foreign and local travels so as to sa ve the economy and share the burden of the current economic challenges. 3.SALE OF PRESIEDENTIAL JET, REDUCTION OF PRESIDENTIAL CONVOY AND MERCEDEZ BENZI E CARS FOR MINISTERS There is need for the Presidency and cabinet to share the impacts of the Austeri ty economic reforms by being exemplary and we are demanding with immediate effec t and without debate the sale of the Presidential Jet, Reduction of the Presiden tial convoys and sale of the Ministerial cars that continue to be a drain on our taxes 4. CORRUPTION Corruption is now rampant and mostly by the Executive and other arms of Governme nt and we find corruption to be one of the key drivers of our poverty as costs t o get services from the state continue to be high and inflated such as the ferti lizer subsidy and drugs for our hospitals whose procurement and distribution det ails are hidden from the public 5. DECLARATION OF ASSETS BY THE PRESIDENT AND HER VICE We are demanding the President and her Vice to declare their assets with immedia te effect so as to bring confidence in the leadership. It is a constitutional re quirement and for purposes of accountability and transparency and dignity of the ir offices. This we demand now as a matter of urgency 6. SALARY ADJUSTMENT FOR WORKERS IN MALAWI The continued depreciation of the kwacha has eroded workers incomes and we are dema nding a corresponding level of salary adjustment to cushion them from high cost of living. When the Kwacha was devalued by 49% most workers were given an averag e of 25%.We are therefore demanding a comprehensive fair review and adjustment o f workers salaries to mitigate the continued depreciation of the kwacha and high co st of living. 7. BLOATED CABINET, PERMANENT SECRETARIES AND EXECUTIVE ARROGANCE (7a)At a to note ime when questing time when we are all making efforts to cut down on costs we are shocked and observe that the recent cabinet has been increased in number at a t we expected the cabinet to be reduced we are therefore demanding and re a reduction of the number of Ministers and Deputies

(7b) PERMANENT SECRETARIES We are demanding that each Ministry should only have one Permanent Secretary ,th e presence of more than one Permanent Secretary in a Ministry is a drain on our taxpayers money especially at a time when we are going through serious economic

challenges and that such duplication of Permanent Secretaries does not add value . We strongly believe that one Permanent Secretary supported by a strong technic al directorates can serve a ministry much better and at a reduced cost We are also shocked with the continued executive arrogance that seem not to take advice and criticism and this has been displayed by the many comments that have been uttered by the Executive especially the Presidency. A number of institutio ns such as Public Affairs Committee have tried to engage the Presidency and the Executive arm with similar issues through dialogue but the result has been casti gation and ridicule of such groups and people through the public radio, Televisi on and at political rallies ULTIMATUM These demands in the petition are grievances, Frustrations and views from Consum ers throughout the Country the Chapters of the Consumers Association of Malawi a nd Consumers and many Partner Organizations. WE ARE EXPECTING THAT OUR DEMANDS WILL BE ADDRESSED WITHIN FOURTEEN DAYS WITHOUT WHICH WE WILL RESORT TO CONTINUED DEMONSTRATIONS THROUGHOUT THE COUNTRY.