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| Business |
| RBM refuses to devalue kwacha |
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by
Ephraim Munthali, 17 September 2003
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18:09:49
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The central bank has diplomatically ignored donors’ calls to devalue the kwacha, preferring to leave the market to shape the currency’s fate.
It was revealed over the weekend that donors have lined up proposed measures which government must undertake, including letting go of the kwacha, before they release budgetary support suspended three years ago.
But Reserve Bank of Malawi governor Elias Ngalande said on Wednesday: “Those are their views. As far as I am concerned, the Reserve Bank has nothing to do with the behaviour of the kwacha, it is the market.”
The donors believe that a weak kwacha will make the local market competitive.
China is currently using this strategy which has ended up blocking goods from other countries like the US as local products are cheaper than imported ones.
Taking the cue, British producers are also pushing their government to knock down the ever-powerful pound sterling for to compete on both the domestic and export markets.
Being a member of the Common Market for Eastern and Southern Africa (Comesa), Malawi may find itself in an embarrassing position if it tries to use such strategies as it may be regarded as unfair trade practice and hence defeat the aims of the Free Trade Area (FTA).
Local analysts and producers have complained in the past that a weak kwacha is one of the major factors raising production costs since most of the raw materials are imported.
Others say a strong kwacha is the best bet for Malawian producers than a weak one, observing that the country imports more than it exports.
Having lost almost K15 in a month, the kwacha has remained stable for two weeks now confirming fears that “greedy business people” are sabotaging the kwacha by buying dollars excessively in panic.
Dealers Association of Malawi (Deama) president Webster Kaunga said yesterday their decision to stop driving the money market on the basis of supply and demand has helped steady the beleaguered currency.
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