Kwacha to stabilise, no collapse of Malawi economy – Reserve Bank governor

The Reserve Bank of Malawi (RBM) governor Charles ChukA remains confident the Kwacha  currency will soon stabilize according to market fundamentals saying  the country’s economy will not collapse.

Chuka: Malawi Kwach will soon be stable

Chuka: Malawi Kwach will soon be stable

Malawi Kwacha: Weakened

Malawi Kwacha: Weakened

“RBM believes the kwacha exchange rate has over depreciated given the current level of foreign exchange reserves. The government fiscal operations have been significantly curtailed and domestic borrowing is now being contained in line with the IMF supported economic program,” Chuka said in a statement seen by Nyasa Times.

Currently, the kwacha has lost value by 338 percent from K169 against the US Dollar, since it was devalued in May 2012.

Chuka said RBM has  strengthened its instruments of monetary policy and expects to tighten monetary conditions without raising interest rates further.

“With these efforts in train, combined with continued use of available foreign exchange reserves, the kwacha should stabilise soon,” said Chuka.

He also noted that the kwacha depreciation is hurting low-income earners and is creating undue uncertainty in the business community.

Chuka said the weakening of Kwacha should not be viewed as the collapse of the Malawi economy.

“Despite the debilitating exogenous shocks, the kwacha have performed relatively better than in other countries when they also floated their currencies in the 1980’s and 1990’s. Malawi continues to pay for its international obligations and foreign exchange reserves have never been better, especially taking into account the loss of donor direct budget support.

“Fiscal and monetary policy coordination has been strong despite daunting fiscal pressures. In particular the Reserve Bank has demonstrated capacity to implement needed monetary policies and is committed to take any actions to stabilise the kwacha in weeks ahead,” he said.

But the World Bank recently questioned RBM implementation of monetary policy, observing that the policy appears to be losing its effectiveness.

In Malawi, the main objective of monetary policy is to achieve low and stable prices, which preserves the value of the kwacha and encourages investment needed to achieve sustained economic growth and employment creation.

RBM uses a variety of monetary policy instruments that include the Policy Rate (PR), the Liquidity Reserve Requirement (LRR), Open Market Operations (OMO) and communication.

“In an attempt to arrest the depreciation in the value of the kwacha, government has implemented a number of administrative measures to regulate foreign exchange trading by authorised dealer banks. However, so far, these measures have had only a limited effect,” reads World Bank statement in its biannual publication on Malawi called the Malawi Economic Monitor.

World Bank is among a group of multilateral donors that suspended budget support to Malawi in November 2013 because of plunder of public funds at Capital Hill dubbed Cashgate.

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13 thoughts on “Kwacha to stabilise, no collapse of Malawi economy – Reserve Bank governor”

  1. Hillary says:

    this is so unreasonable. its not stable yet! imagine the difference just for a short while; k169-k735/750? is this not a k1000? lets call a spade a spade and not otherwise. focus on the strategies that will make it regain the value and not sitting back and contented like this, this is being chicken headed!!

  2. Ngwanya weniweni says:

    What kind of collapsing do you mean? Mr. Chuka if you don’t have anything tangible to share with amphawi koma odzitsata just remain silent. Malawi has already collapsed. You mean you can’t see for yourself? From K160 = $1 May 2014 to K750 =$1 Jan 2016 where is the dividing line, your silly mouth?

  3. Funzo says:

    Is this tagged, ‘Ha ha ha!’?

  4. International Observer says:

    People forewarned the practice of “Floating” the currency but a lot of Malawians bought it wholesale saying PP monetary policies were indeed instituted to right the wrongs the previous DPP had brought. Why should the same people turn around now and castigate the same institution they praised just 2 – 3 years ago? For your information what the IMF/World Bank will do is to put on the table policies that won’t work in a Malawian scenario knowing very well that her production base is non-existent. With all the text-book economists abound in the country nothing seems to be promising other than competing amongst themselves to see who comes up with plausible essays on the media and not economic reparations. Have they in their lifetime undertaken a research to determine why our economy is not vibrant, none-performing, in tatters and in a sorry state? How do you float a currency without putting in place some cushioning mechanisms? You just wake up one morning and think of devaluation just like that and with a very enormous devaluation chunk. Was it not the late president who vehemently refused to do such until a proper prop-up was put on the table by the same currency regulators, and the whole country plus her myopic economists ganged up and shot down his reasoning? This mess is the brain child of every Malawian to endure. Bring forth your first class economics other than making noise in the peripherals. Where have you heard that a floated economy strives?

  5. Kenkkk says:

    Is this overseer of cashgate still the governor? He should have been the first person to be sacked when Peter came to power.

    But lo, how can dpp sack their corruption friend who turns a blind eye to huge sums of dubious money transactions?

    Unless you are his hosrding some foreign reserves deliberately only to be released at the time you and Goodall say the economy will start to improve, I can’t see how our economy will improve.

  6. patrick says:

    All workers civil servats are paid in Malawi kwacha so how can you expect us to understand and appreciate that 338 percent devaluation is good and we are doing better than other countries. ALL items have gone up by 338% but its only the salaries dont go up. SO Chuka please dont give us these stories and accept reality that since 2012 Malawi kwacha is the worst performing currency in the world and something is not right, so stop arguing with World bank accept your monetray policies are not working and change so that kwacha can stabilise. As all this depreciation is being blamed on all sorts of excuses when we know its your weak monetray policy is to blame,

  7. mphatso says:

    The excessive depreciation this year is due to the blunder by Leserve Bank to allow exporters like Limbe leaf,JTI africa to keep there export proceeds in Dollars in full, after introduction of this 2015 policy these exportes and NGOs send quotes to each bank and force them to offer them higher rates, this has contributed to the Collapse of Malawi Kwacha and the economy. Why give exporters 100% before it was only 60% that helped kwacha to be stable. It is funny when we had less import cover Kwacha is stable and now we have import cover kwacha is nosediving. Change this policy immediately and you will see kwacha will start appreciating and inflation will also come down

  8. ben says:

    2014 anawina MCP kwacha sanga dusa 450, koma nsopano mpakana 750 ma economics muna phunzira kuti.

  9. Washington Zoo, Panda says:

    Tchuka is talking nosence, and deserves to be sacked, he has brought Malawi to its knees economically

  10. Bupe says:

    Mr chuka please we are not in the 90’s or 80’s…….! when will you people learn to accept the truth on the ground?

  11. kasim says:

    Mr Chuka don’t lie to the people in abid to save your job. People have heard these stories more than necessary ili CD itakandika. Accept that now you have no clue how you intend to steer this nation economically. One wonders the much touted GG the guru at IMF or World bank and yourself with your degrees in economics failing to come up with a sustainable economic policy for the nation.
    Leave to this to a foreigner maybe it will work , you need someone from stronger cultures to head the central bank. They brook no nonsense the way they handle issues . Dancing to the partisan presidential tunes on economic issues will not help you and the nation at large. We will surely blame you for sinking this nation. You are going to destroy your legacy, the best option is to resign. My advice

  12. thom says:

    A Chuka Munali kuti , ma dzuka ochedwa kwambiri, kwacha yafika 770 to a dollar, malephera mupereka resignation wanu, Tatope ndi iwe, nthawi mayamba ku nkhala governor tapeza devaluation okha,

  13. Drakenk says:

    This is Rubbish, do we have able people at Reserve Bank ?
    Ngwira…. MCP

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