Economics professor says kwacha devaluation a necessary evil Malawi urgently needs
Professor of Economics at the Malawi University of Business and Applied Sciences (MUBAS), Betchani Tchereni, has welcomed the Reserve Bank of Malawi (RBM) move to devalue the local currency by 44 percent, arguing “it reflects the true market value of the Malawi Kwacha on the ground”.
RBM devalued the Malawi Kwacha on Wednesday from K1,180 to K1,700 against the United States dollar, sparking despair among many Malawians who fear, among other consequent pains, a rise in prices of essential commodities.
In media interviews, Professor Tchereni said the Kwacha already trades at 1,880 on the parallel market, adding that “the devaluation was necessary and is the only medication to heal Malawi’s ailing economy”.
“Already, importers were already accessing the US$ at 1,880 for them to keep their businesses afloat, buttressing a call that the Malawi Confederation of Chambers of Commerce and Industry (MCCCI) has been making for some time to have the local currency devalued,” Tchereni said.
Government sees the devaluation as a panacea to spur the journey to attaining IMF’s Extended Credit Facility, which if approved, will immediately unlock $180 million. Besides, it will beckon multilateral and bilateral inflows (donor support) in millions of dollars.
However, experts have been quick to advise government to monitor the situation on the ground. And through its spokesperson, Moses Kunkuyu, government says it expects MCCCI and other players not to leverage off this devaluation to the detriment of the poor.
“It is simply normalization of the true value of the currency. Measures will be taken for any unjustified increase of prices for basic needs of people. Notwithstanding, government will cushion any genuine effects of devaluation with interventions including enhanced Social Cash Transfer programs, among others.
“In comparison to after-effects in the very short term and long term benefits, the latter stands out beneficial to the citizenry and industry,” Kunkuyu said.
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