MCCCI blasts Reserve Bank of Malawi over Kwacha teetering
The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) has lambasted the Reserve Bank of Malawi (RBM) over RBM’s claims that the Malawi Kwacha will stabilize in the near term, describing them as “misleading to the business community and even the nation as a whole” MCCCI argues this is unlikely to happen “without a solid creation of foundation base”.
“Based on the status quo, it is anticipated that the local unit will continue depreciating and its depreciation can only be stopped unless the government comes up with necessary strong fiscal and monetary policy measures to tame its unstableness.
“In the meantime the business sector should continue be on a lookout and stay agile in their operations, as the local currency uncertainty and other macroeconomic fundamentals are perceived to continue,” reads an MCCCI statement on Wednesday.
MCCCI statement is in response to an RBM statement about the causes of the Kwacha depreciation and outlook in the near term, which the bank issued on January 28, 2016 in light ofa sharp and longer than anticipated depreciation of the local unit since July, 2015.
In its statement, MCCCI says it aims to provide“its position on whether RBM’s near term prospects on Malawi Kwacha stability are practically achievable”.
MCCCI dismisses RBM’s argument that the persistent massive depreciation of the local currency in which the country is experiencing now, “is a normal thing other than an economic crisis”.
“Being a highly importing country, unstableness of the Malawi Kwacha is seriously affecting the operations of most businesses in the country and hence reducing private sector activity. While noting the fact that the local unit stability is threated by the lagged impact of uncontrollable challenges in 2015 like the weather related shocks, the key challenges falls under the auspices of lack of effective economic governance or deliberate efforts to implement relevant reforms that can tame the local unit to stabilize.
“Practically, we all know the fact that the local unit massive depreciation emanates from the weak export base in which our economy has. The question is, till when should we continue to rely on tobacco export proceeds? And yet we have a lot of strategic commodities that can bring in a lot of foreign currency and then stabilizing the local unit, as articulated in the country’s National Export Strategy (NES).
“Another point which raises a lot of questions is the RBM’s comparative analysis of the performance of the other countries’ currencies with Malawi Kwacha after liberalization,” reads the MCCCI statement in part.
MCCCI agrees with RBM that it takes a long time for the currency to stabilize once it has been liberalized.
However, MCCCI argues that what RBM could have been telling Malawians is for how long did it take for the referred countries’ currencies to stabilize after being liberalized, “and not just giving us a percentage that in Zambia it depreciated this much after liberalizing”.
“Yet our local unit has already lost value according to their calculation of 338% in just four years, and we are not even sure for how long will such situation sustain,” reads the MCCCI statement.
According to MCCCI, the private sector remains the engine for economic growth and unless and until policies and regulations aim at building the productive base, such economic challenges will not subside.
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We must put in place laws and policies which will close the import and export gap until we are a net exporter. Some of the policies are such as: 1.Ban importation of locally available items regardless of the local prices. 2.Subsidize value addition to our exports. 3.Subsidize production and diversification of export goods such as coffee, macademia etc rather than relying on tobacco alone. 4.Increase taxes on luxury goods such as huge flat screen T.V.s etc. 5.Level the playing field between foreign and indigenous investors. 6.Agressively revamp tourism without undue restriction and regulation in the industry. 7.Urgently by all means… Read more »
The kwacha is nosediving and it will not stop unless Reserve Bank introduces the following 1/ Exporters to keep only 50% of there export proceeds the other 50% they should immediately convert to Kwachas,, currently they are keeping 100%, and they are haording forex and forcing banks to revise rates upwards everyday 2/ The Plus minus deprecaition limit of 0.25 per day and 0.5% per day should be scrapped it is not working it favours depreciation and will not allow the kwacah to appreciate. Unless keep the 0.25% limit for depreciation but for appreciation it should be allwoed to appreciate… Read more »
As long as Goodall or Badall is Finance Minister and Chuka or Tchuka is RBM Governor Malawi Kwacha will continue to depreciate. These guys are clueless
The Reserve Bank is run by people who are also speculators, why overdepreciate our currency? It is high time the Governor and his deputies need to be replaced, in fact these people were supposed to be replaced last year. When you depreciate a currency it means you are killing low income earners and rular population, the businessman will simply adjust to suit the equivalent of the unit. Malawians need a proper explanation from the Minister and Reserve Bank because what they have done has not improved our economy but worsening it. We are an importing nation so what you have… Read more »
Let us just accept the Kwachas trading days are numbered, we will be dollarised like Zimbabawe. How can there be such volaitilty poor governance