05:00 GMT 21st December 2011
But barely two years later, commodity prices are spiralling and fuel and forex shortages have become the order of the day amid accusations of economic mismanagement, leading the IMF to suspend its aid to the country.
The former economist has also managed to upset the donor community with what they have called his autocratic behaviour. Whereas once it praised him for his efforts to root out corruption, his zero tolerance stance is being viewed as a tool to silence his political opponents. One of them is his predecessor Bakili Muluzi, who is being dragged through the courts on corruption charges.
Accusations that the president has become increasingly intolerant appeared to be borne out when he expelled the UK's envoy to Malawi in April following criticism of the government, and again in July when riots against inflation and unemployment resulted in at least 20 people being shot dead by police and many more injured. The UK, Malawi's biggest donor, was among the countries that withheld $500m in aid after raising concerns about human rights abuses.
When he was voted to power in 2004, Mutharika was the presidential candidate of the ruling United Democratic Front. But less than a year into his administration, he resigned from the party following internal acrimony and formed the Democratic Progressive Party (DPP).
Having demonstrated his single-mindedness, he introduced a subsidy programme in 2005 to lift the productivity of smallholder farmers after several years of drought brought poor harvests. He did so against the advice of the IMF and World Bank, which said it was too expensive and undermined private sector activity.
Output was dramatically increased and Malawi became a net food exporter. But in the midst of the crippling economic crisis, exacerbated by falling tobacco prices, the scheme has been cut back.
During the 2010/11 farming season 1.6 million farmers received vouchers to buy heavily subsidised fertiliser and maize seed, costing the government and donors $152.3m. But in October it was announced that 200,000 farmers would be taken off the programme and that a reduced amount of subsidised fertiliser would be available.
The financial downturn and Malawi's dependence on aid for 40 per cent of its income seem to have conspired to tighten the noose around Mutharika's neck. Faced with mounting criticism at home and abroad, he has responded with characteristic stubbornness by increasing the powers of the police and restricting press freedoms.
In February, a lecturer at Chancellor College, part of the University of Malawi, landed himself in hot water when he likened Malawi's fuel and forex shortage to the situation in Tunisia and Egypt, where popular uprisings had just managed to oust hated leaders. The government was furious and the inspector general of police was despatched to question the errant academic.
Alarmed by this turn of events, his colleagues demanded an apology from the police. It never came. In fact, it was Mutharika - chancellor of the University of Malawi and commander-in-chief of the Malawi police service - who responded, stoutly defending the police's actions, saying a police chief would never apologise to a 'mere lecturer'. Academic staff boycotted all classes and the college has been closed indefinitely since April.
That month, Mutharika caused an even bigger upset when he expelled the British ambassador, Fergus Cochrane-Dyet, after he criticised the southern African country's leadership as autocratic in a leaked diplomatic cable.
'Government has decided to expel High Commissioner Fergus Cochrane-Dyet because the tone in the leaked cable was not diplomatic ... government has lost confidence in him,' Vuwa Kaunda, a government spokesman, said at the time. In retaliation, the UK withdrew some of its aid to Malawi. Last year it provided about $30m in budget support to Malawi.
'The right to peacefully assemble and demonstrate faced a terrible setback this year,' said Augustine Magolowondo, a political analyst based in the capital Lilongwe, referring to the harsh crackdown of July's anti-government protests.
'The heavy-handedness with which the authorities have responded to demonstrations needs no emphasis. There were even some unorthodox [ways of] repressing basic freedoms when it was suggested by the authorities that those who wanted to demonstrate must pay a deposit of [$12,000], itself a colossal amount of money, which effectively was to curtail such constitutional rights.'
That proposal was dropped and since October 'provocative movements' or 'protest gatherings and demonstrations' have been banned to preserve 'peace and harmony in the country', information and civic education minister Patricia Kaliati told reporters.
Magolowondo said the DPP's huge majority in parliament means that its roles of oversight and providing checks and balances have been 'greatly compromised'.
An additional blow for those seeking to have their voice heard has been the decision to postpone this year's local government's elections until2014. This is not the first time local elections have been put back - none have been held since 2000.
'During the first five years of the Mutharika administration, Malawi made significant positive strides in socio-economic development,' acknowledged Magolowondo. 'This was particularly in the area of infrastructural development and food security. It was only natural for people to hope for a better future under the same administration, hence the overwhelming mandate that the DPP got in 2009 general elections. Unfortunately, in the last couple of years, the much touted economic miracle has been facing challenges that in effect have shaken the very foundations of Malawi's success story.'
In February, civil society organisations' attempt to stage a demonstration against fuel shortages and rising prices ended before it even got off the ground with the arrest and brief detention of its leaders. Billy Mayaya was one of the organisers of the July 20 protests, which attempted to present a petition to the president outlining public concerns over the worsening economic situation and the feeling that democratic space was being sgueezed.
'The expectation had been that the government would concede that the situation was dire and that there would be an incremental response to the key concerns raised in the petition,' he recalled.
Instead both the police and army were deployed to break up the protest, which spread from Lilongwe to the biggest city, Blantyre, and Mzuzu in the north.
President Mutharika vowed to 'ensure peace using any measure I can think of', as protesters gathered for a second day. 'If you break shops and banks, will you have fuel? You demonstrated yesterday, but is there fuel today? These people are not being led by God, they are being led by Satan,' he stormed.
Mutharika and his political allies believe that there are elements inside and outside bent on sabotaging his administration, punishing it for its independent mindedness over its food subsidy scheme.
Although the president has privatised loss-making state enterprises, the IMP and World Bank want him to free up the economy much more. In June, the IMP's resident representative Ruby Randall told local media in Lilongwe the government's growth forecasts of 6.9 per cent for 2011 and 6.6 per cent for 2012 were unrealistic.
The UN's IRIN news agency quoted Randall as saying, 'There are a number of structural constraints that Malawian industry is facing like shortage of fuel, inconsistent electricity supply, water shortages in cities ... All this has affected output.'
Under pressure from the IMF, Mutharika devalued the local kwacha currency by 10 per cent in August. The lending institution had made it clear that it would resume its aid programme if the country devalued its currency, saying that the strong kwacha had been hurting the economy by making Malawi exports more expensive for foreign customers and also creating shortage of forex.
In August, British foreign secretary, William Hague, said he remained concerned about the situation in Malawi. He urged Mutharika to allow legitimate democratic debate and to open a genuine dialogue with civil society organisations. 'Malawi's grave economic crisis can only be tackled if the government works with the international donor community. If this doesn't happen, the economic and social progress made in recent years will be lost,' he warned.
The UK is continuing to give Malawi aid that does not go through the government amounting to $145m over the next year, but Norway, the World Bank and Germany have suspended theirs, as has the US through the Millennium Challenge Corporation (MCC). Following the violent crackdown of the July protests, Washington announced it was putting on hold a $350.7m five-year energy deal it signed with the Malawi government because of poor governance.
In a statement, the US said at the core of an MCC partnership is the expectation that countries maintain a demonstrated commitment to political pluralism, human rights and the rule of law throughout the life of the programme.
The MCC agreement was expected to benefit over six million Malawians by reducing energy costs to enterprises and households, improve productivity in the agriculture, manufacturing and service sectors, and support the preservation and creation of employment opportunities in the economy. Malawi is one of the poorest countries in the world, with an estimated 75 per cent of the population living on less than $1 a day. A fall in tobacco exports, which accounts for over half of the country's forex earnings, has only made the situation worse.
Civil society groups behind the July protests said Malawi was facing a 'series of catastrophes'. 'There is cause to believe that the current (acute shortages of fuel, electricity and foreign currency) shortages are the worst in all our 47 years (since independence),' the statement said. They accused the government of failing to listen to the concerns of people, and they feared Malawi was turning into an 'autocratic kleptocracy'. Today, there are still long queues at filling stations and, speaking to people, there is little hope that the situation will improve soon. Traders are making a killing on the black market, selling fuel at double the price to hapless motorists from jerry cans and drums.
But Mutharika is resisting donor pressure to liberalise fuel, saying, 'We have requested for reserves to cater for lean times as we have done with maize. Our fuel companies do not keep any [reserves] as they say it is expensive to do so, and that is why we have always run into shortages.'
In an attempt to share some of the public's pain, the government has suspended foreign travel of its officials. Kamuzu Chibambo, president of People's Transformation said it had to do much more than this if it was to improve conditions, notably launching measures to increase forex. The aid squeeze has forced President Mutharika to introduce austerity measures and increase taxes. His 'zero deficit budget' of earlier this year is designed to 'accelerate development' by drawing on the country's own resources rather than relying on donors.
Chibambo describes the zero deficit budget as anti-poor and anti-investment. 'We have come up with the zero deficit budget because the people who were helping us have cut assistance. We say we want to be an export-oriented country but how is that possible with the introduction of measures that are anti-investment,' he said.
In October, a high-powered delegation led by minister of foreign affairs, Peter Mutharika, was sent to the US, the UK and the EU in a bid to improve relations. But a statement from the UK's foreign office urged the need for the Malawi government to 'engage fully with the IMF and other donors in order to tackle the serious economic crisis'.
It added, 'The UK has indefinitely suspended the provision of general budget support to Malawi. This programme will remain suspended until the government of Malawi addresses our concerns over economic management, governance and human rights.'
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