Malawi: MEJN Supports Tobacco Price Fixing

Source from:  The Chronicle Newspaper (Lilongwe) April 3, 2006 04/04/2006

Malawi Economic Justice Network (MEJN) says it supports the minimum price for tobacco fixed by President Bingu wa Mutharika but warns against further delays in commencement of the sales due to price disagreements, saying this will adversely affect the Gross Domestic Product (GDP) growth rate. Mutharika, during the official opening of the tobacco selling season, fixed the minimum price for tobacco at $1.10 per kilogramme and $1.70 per kilogramme for the top most grades. MEJN acting National Coordinator, Mabvuto Bamusi said in an interview Thursday government has a duty to protect subsistence farmers from exploitation by tobacco buyers. "As civil society, we feel the state must intervene on issues of economy and after pumping a lot in tobacco farming this year through the subsidised fertiliser it is obvious that they (government) expect good returns from it. It is therefore suicidal to sell the leaf at give away prices," said Bamusi. Bamusi, however, attributed the disagreements in tobacco prices to liberalisation. "All this is happening because our economy is too liberalised. This should be food for thought for government to revisit the liberalisation policy to make it an effective poverty reduction tool where buyers are not supposed to dictate prices," he said. But Bamusi said further delays in commencement of the sales will adversely affect GDP growth rate this year. "Tobacco contributes about 30 percent to the GDP and therefore delays in commencement of the sales because of price disagreements will determine GDP growth rate this year," he said. The economic watch dog added that the delays will also affect forex inflows expected to provide a cushion for the stability of the local currency. "We are just coming from a lean period when our forex reserves had run dry. Delays in the sales will have an impact on the strength of our currency against major currencies," he said. Bamusi further said the delays will negatively affect the levels of employment as 70 percent of Malawians are directly or indirectly employed by the tobacco industry. He, however, advised government to ensure more room for discussion with the buyers so that all stakeholders benefit from the sales. Enditem