By Eric Chiputula:
The Reserve Bank of Malawi (RBM) has says it has no any plans to devalue the country’s currency further after the recent 25% it effected in June this year.
In June this year the Central Bank effected a 25% devaluation on the local currency in a move that was meant to stabilize the Kwacha.
However since that devaluation there has been growing social media reports that the Central Bank intends to devalue the Kwacha further arguing the first devaluation had failed to achieve desired results.
But in a statement released on Tuesday and signed by RBM Governor Dr Wilson Banda,the Central Bank says contrary to the social media speculations Malawi Government is exploring and working on several measures and interventions to address the foreign exchange-supply inbalances.
“The RBM has noted with concern persistent speculations and uninformed opinion about the future direction of the exchange rate. The RBM believes that the current pressure on the exchange rate is fueled by these speculations and therefore not reflective of true demand and supply dynamics,” said Banda in the statement..
The RBM Governor further observed that these speculations are also leading to market participants taking a wait and see approach to foreign exchange transactions, a situation which is compounding the situation further.
“The RBM therefore wishes to inform the general public that it has no intention to devalue the kwacha further in response to these speculations. There is no reason to do so,” said Banda.
Added the RBM Governor: “The RBM wishes to notify the general public that the adjustment was sufficient and has brought the exchange rate to the desired market clearing level. Following the realignment, there has been improved flow of foreign exchange which is helping with importation of strategic commodities in the
country.”
Banda said among the interventions and measures that Malawi Government is putting in place to address the foreign exchange situation include revision of the Exchange Control Act to among others, introduce measures to curb illegal externalization of foreign exchange.
Other measures are diversification of exports towards the mining sector that include gold, gem stones and rare earth; establishment of mega farms to enhance agriculture commercialization efforts, targeting high value export crops; establishment of structured markets for export crops such as legumes to enhance formal trade and increase receipts through formal channels; and creation of a testing lab to improve export value.
“The private sector is urged to leverage on these initiatives to improve foreign exchange generation,” said the RBM Governor.
Banda further said going forward, the RBM will continue to allow the exchange rate to respond to market fundamentals by maintaining a flexible exchange rate regime.
