Malawi Kwacha floatation faulted – Economic expert

A professor in economics, Chinyamata Chipeta has spoken against the floatation of the Kwacha, saying the policy is wrong as the local unit continues to weaken further against the US dollar with the middle rate falling to about K440 compared to about K430.

Kwacha

Kwacha

The floatation of the kwacha was made in 2012 by the previous Joyce Banda administration in an attempt to adhere to retain a renegotiated three-year Extended Credit Facility (ECF) arrangement for Malawi in the total amount of US$156.2 million approved on July 23, 2012.

However, Chipeta pointed out that the policy was adopted without proper research on the ground and cautioned the Peter Mutharika government against borrowing economic policies from the West ‘wholesome’.

“The devaluation was okay, but the floatation was wrong,” said Chipeta on Friday at the Malawi Institute of Management (MIM) in Lilongwe.

Chipeta, who is also executive director for Zomba-based Southern African Institute for Economic Research (Saier), added:  “You do not float a currency when you don’t have enough foreign exchange reserves and when donor aid is uncertain.”

Chipeta, who conceived indigenous economics at Chancellor College, a constituent college of the University of Malawi, was speaking at a two-day national policy workshop designed to explore how Malawi can use indigenous knowledge in formulating appropriate policies for its economic development.

The meeting  with funding from the Nairobi-based African Economic Research Consortium (Aerc), has drawn presenters such as RBM deputy Governor (Economic Services) Naomi Ngwira, University of Malawi deans Edge Kanyongolo, Patrick Kambewa, Sosten Chiotcha, Chiwoza Bandawe and also Malawi Economic Justice Network (Mejn) executive director Dalitso Kubalasa.

Chipeta said “not all foreign advice is consistent with characteristics of the local economy.”

Governor of the Reserve Bank of Malawi Charles Chuka is on record saying  fixing the kwacha was not an option because that could lead to Malawi getting off track with its IMF programme.

Said Chuka: “Any attempt to abandon this exchange rate system will make matters worse. The market-determined exchange rate is the best for Malawi.”

“If a currency is free-floating, it’s a guarantee that you will find dollars on the market…I pray that this system is to stay for Malawi,” said Chuka.

He recalled that in 1994, Malawi ‘auctioned’ the kwacha and the currency shed its value from K4 to K8 to a dollar in a week before losing its value further to K18 after five weeks.

Chuka said during the same period, inflation rose to 91 percent and that interest rates soared to as high as 46 percent.

“After that period, inflation fell sharply to 9 percent and foreign reserves were built up. People should not forget that this is not the worst,” said the RBM governor.

Consumer Association of Malawi (Cama) boss John Kapito argues that while fixing of the currency is not a good option, a managed float would be appropriate for Malawi adding that this was not a new concept in Malawi as it has successfully been implemented before even under a programme with the International Monetary Fund.

The Kwacha has been facing renewed pressure and government said it needed donor support to keep the local currency from dropping into red zone territory.

Analysts are projecting that the local unit may hit K525 to the dollar by December this current average selling price of K460.

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PUTEN
Guest

IF MALAWI UNIVERSITY IS RANKED 99 OUT OF 100 UNIVERSITIES IN AFRICAN DO YOU THINK CONTRIBUTIONS FROM OUR PROF FROM THE SAME UNIVERSITY CAN CONTRIBUTE GOOD IDEALS TO OUR COUNTRY.

TO OUR FRIENDS OUR UNIVERSITY IS LIKE SKYWAY BUSINESS COLLEGE .

Ulesi ndi minyama, Cashgate ndi ugalu
Guest
Ulesi ndi minyama, Cashgate ndi ugalu

Dolo pa malawi ndi bakili. Anatisankhira chimunthu chofaifa. Anadziwa kuti amalawi akakhala pa mpando safuna kuchokapo, ndiye osampatsira dala munthu wamoyo wathanzi woti adzakhala ndi moyo wautali adakalamulira. Long live Bakili you are very wise.

verson
Guest

The problem is Economics, it has different principles and there is always different solutions to economic problem. All these people are talking about the same thing in different jargons.

clement
Guest

These so called Economics Tutors know nothing about real economics on the ground. Once you fix the kwacha a parallel market immediately emerges, and that confuses the trading system. The black market thrives and banks become dry. Chuka is aware of this. Better kwacha igwe koma izipezeka

Medrian Kaunda
Guest

I think everyone leaves out one very important player in this foreign exchange scenario. That is the resident Asians in Malawi, not known for national patriotism in regards to the economy. Instead it is always mzungus and donors who gets the blame, A realistic look at the actual situation on the ground. would pinpoint the banks and Asians as the REAL culprits. Please do not reject this comment with an alleged excuse of avoiding racist remarks. You have enough in regard to mzungus to go around allready.

DOBO
Guest

The problem is not with economists,the problems is not the donors but the problem is the leadership.Malaysia was poorer than Malawi 20 yrs ago but voted unselfish strong visionary leadership which put that country on map.We can talk this and that but without visionary reader nothing can be achieved.We will remain where we are.May be
the problem is with majority Malawian.So, the wise minority are suffering due to irresponsible majority decisions.

Mong'onyolani
Guest

is it wrong to suggest a remedy when things go negative? No. Ndiye kwacha isiyeni ifike pa MwK700

mpopoma
Guest

Chipeteta right, what kind of economics did. Some of you learned ?.what he says is that you don’t float the kwacha in an economy where you have little earnings. The bazungus have capitalized on our week president’s economic s. Vizeleza

MaiMai
Guest

Where were you Chipeta then? Why wait to give advice after 2 years while when kwacha stsrted crumbling you were busy holding chalks. ..rubbish economist.

TALK IS CHEAP! ALL YOU ECONOMISTS ARE SO DUMB SO? SHUT-UP.

ochewa enieni
Guest

eish very bad kwa akumudzi loma adzasangalako kkk

wpDiscuz

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