There have been mixed views following the Reserve Bank of Malawi’s (RBM) devaluation of the kwacha from K1 180 to K1 700 against the US dollar in authorized dealer banks.
Announced yesterday by RBM Governor Wilson Banda, this means that the Kwacha has been devalued by 44 percent.
In a statement, RBM Governor Wilson Banda said this follows the supply-demand imbalances and mismatch in the exchange rates in the cash and telegraphic transfer markets.
“Spot checks on some market players indicate that the market is able to clear bills at this rate,” said Banda.
The move came a day after the Malawi Confederation of Chambers of Commerce and Industry (MCCCI) recommended the devaluation.
In a statement, MCCCI Chief Executive Officer Chancellor Kaferapanjira highlighted the need for realignment of the exchange rate when forex inflows improve after disbursement of funds from the IMF’s Extended Credit Facility.
He said the development community provide safety nets to cushion the vulnerable from devaluation impacts.
However, Former Reserve Bank of Malawi (RBM) governor Dalitso Kabambe said the country should expect further depreciations of the kwacha as the K1 700 to a dollar exchange rate is still below the “market equilibrium”.
“Furthermore, the devaluation is reckless as the previous one given that the fundamentals of the monetary policy remain helpless and the fiscal consolidation non-existent,” he said in a statement.
Kabambe said he sees no recovery from macroeconomic meltdown, adding that the devaluation “will only make the suffering experienced by Malawians worse” as prices of goods such as fuel, fertilizer and food will go up.
