Malawi Kwacha depreciation ‘worrying’: Don’t panic, says Reserve Bank governor

Malawi currency the Kwacha continue to face a slide against the major world currencies with opposition parties saying its worrying development  but the Reserve Bank of Malawi (RBM) Governor, Charles Chuka, said there is no need for panic.

Chuka: No news that Kwacha is depreciating

Chuka: No news that Kwacha is depreciatingWa

Spokesman for finance in opposition Malawi Congress Party (MCP), Joseph Njobvuyalema said depreciation of the kwacha or weakening in the value of the local currency is “worrying.”

He said Malawi  being a highly import-dependent economy, every time the kwacha loses this amount of value, the cost of goods and services goes up significantly and almost immediately.

“It is worrying because it may only be a matter of time before we see increases in prices of goods,” said Njobvuyalema.

He also said the country expects to  have rise in the rate of inflation.

But central bank governor downplayed the weakening of Kwacha, saying  “it should not be news that kwacha is depreciating.”

Chuka attributed to depreciation of Kwacha to a high growth in imports relative to exports .

“There is no news that the kwacha is depreciating because we were expecting it anyway. [It is] because the country still has not managed to diversify its sources of exports,” said Chuka in an interview published in The Nation newspaper on Thursday October 16, 2014.

“And stories about donor flows remain negative at this point and there is no good news as yet.”

He said despite the fact that donors stopped bankrolling Malawi’s recurrent budget, the country is not stuck.

“It is growing and it is requiring more and more imports. The imports are necessary to grow in fact. Hopefully, at the new exchange rate, we have more raw materials and intermediate goods, basically inputs in industry.

“We hope data will show that in fact our imports have shifted in the sense that we are importing more of industrial inputs. So, as the economy grows, demand [for dollars] also grows,” explained Chuka.

The Governor said Malawi’s problem is that the nation has not yet reached a point where it is producing more exports.

“We need a bit of time to start producing more exports. So, interest rates remain so high and until we have stabilised the economy and interest rates come down, diversification of exports will still be a problem. So, we have more demand for forex than we have supply.”

The  weakening of Kwacha is happening soon after the country has just closed its marketing season for tobacco, touted as the main driver of the strength of the kwacha as the crop dominates the foreign exchange revenue buffer for Malawi.

Follow and Subscribe Nyasa TV :

Please share this Article if you like Email This Post Email This Post

More From the World

Sort by:   newest | oldest | most voted
Benjamin Mnyenyembe
Guest

Dzikoli Ndi Lafodya

Medrian Kaunda
Guest
As I recall, 20 years ago the government of the day published the finding that Malawi had to diversify its exports away from tobacco alone, in order to be better able to export and obtain foreign exchange. The same was seen 10 years ago, and now we see the same statement once more, meanwhile NOTHING has really happened. As I recall, 20 years ago the government lamented that there were too many teenage pregnancies, and too many young girls (children, really) dropping out of school and being married at a too young age. The same laments came 10 years ago.… Read more »
wangawanga
Guest

Mr chuka is a bad economist .he study markert economic which means he thinks like a vendor
Buying and selling .however those type of trade does not help ordinerly Malawian
Let him go he has let our country down with his poor head thinking

Love your neighbour as yourself!!
Guest
Love your neighbour as yourself!!

Its ridiculous Mr Chuka to Chuka to tell somebody in problems a mere “Don’t panic”!! Anthu ali pamavuto mma townmu bambo!! Inu mukuona ngati umbavawu chikuchititsa ndi chani??

Wamandasi
Guest

Amai Che Joyce depriciate Mk by a whooping 60% to get award and be called most influential woman. In process white people benefit from our stupidity. Azungu will give loan, get interest and demand depreciation. Anthu oipa mtima. Ine munthu okondweletsa azungu on his/her espense amandinyasa

Chilungamo pa malawi
Guest

Amalawi sinditha kumvesa kuti vuto lathu ndi chani anthu tili ndi zithu zabwino kwambiri kuposa mayiko ambiri eg mtedza, nyemba, rice ,cotton timakanika kumapanga export bwanji?

khamani!!
Guest

Kuphwanya chizungu a governor … He is not making sense. Import surge does not necessarily imply growth .. it can also imply a depleting local production base … Malawians deserve better. Not everyone in a jacket and tie is a professional.

Love your neighbour as yourself!!
Guest
Love your neighbour as yourself!!

Usavutike aise!! DPP positions are given based on relationship and party membership not any qualification!!

John Thomas
Guest

I know i will not be popular, but i would say stop wasting forex on importing those Japanese second hand cars and give priority to value adding imports (Raw materials). The tax authorities would lose out in the short term, but the economy as a whole would benefit in the medium to long term as the export base expands.

SAMSON
Guest
Mr. Chuka is not a comfortable man and he is suffering from a guilty conscience . He knows he lied to the nation and he has no idea how to hold the currency strong. When he devalued and floated the Kwacha some 2 hand half years ago he clearly stated and promised that the devaluation and the floatation of the currency shall bring good results for the economy and that life shall be alright after a few months. He was supported by the Bankers Association of Malawi and some of those representatives from the international agencies with offices in the… Read more »
John the Economic Baptist
Guest
A currency cannot be fixed. Many countries have tried: Soviet Russia, Zimbabwe, Thailand etc they all failed. At least keeping a currency artificially weak; but trying to keep it artificially strong is an even more exceptionally idiotic idea …especially if you’re in the top 10 weakest economies of the world (which we are). A currency is only valuable if someone else wants to buy it (ie they want to buy goods denominated in that currency). In Malawi’s case, we don’t really offer the world much in terms of goods/services the world wants…yet each year we want more of what the… Read more »
chikondi
Guest

Create a better business environment. MRA is a nightmare, importing raw materials is way expensive, any decent business gets greedy officials sniffing around for ‘help’. How about low interest business start up loans, free production and finance classes, tax breaks until companies reach a set income level. Sorry, I forgot. To complicated bwana.

wpDiscuz

More From Nyasatimes