Whose fault is the perpetual devaluation of Malawi Kwacha

As anxiety over depreciation of the Malawi Kwacha persists, so does the blame game. Some blame the previous Joyce Banda and PP government for floating the exchange rate regime, while others believe that Peter Mutharika and DPP government of five months have failed to stabilize the Kwacha. And there are those that blame the tobacco seasonal variations and the frozen donor aid which are both the main sources of foreign currency reserves.

Malawians to dig more in their pockets to pay for services

Malawians to dig more in their pockets to pay for services

But whose fault is it really?

If we remove our political grudges and vendetta, which clog up our judgment and choose to look at the perpetually depreciating Kwacha with some economic sanity, we will, before pointing the finger at anybody, ask ourselves why presidents and governments have come and gone, but devaluation has remained? We would consider that whether fixed or floated, tobacco or no tobacco, aid or no aid, the Malawi Kwacha has continued to depreciate drastically over the past 20 years of our democratic governance.

We must remember that when we talk of the perpetual devaluation, we are talking about a perpetual consumption of more foreign products against perpetual failure to domestically produce the equivalent output of products to sell outside Malawi. Therefore, if we must blame someone, then we must blame the one that has consumed more but failed to produce the equivalent or more exports.

We are in a Capitalistic and Free Market Economy, where the creation of wealth or the making of money is hugely the responsibility of the private sector or in simple terms, the people. Government is a fiscal policy maker, implementer, and monitor. It is also a monetary policy maker, implementer and regulator through the Reserve Bank of Malawi. The fiscal and monetary policies do not create wealth, or foreign currency. On the contrary the policies only endeavour to create, sustain and monitor an enabling environment for the economic growth of the people or the private sector.

Therefore, while all the past presidents and governments of Malawi, and probably the incumbent too, have their own portions of blame to shoulder for the ever depreciating Kwacha, a huge portion of blame rests on our shoulders for our continuous failure to produce the right quantity and quality of exportable products, to meet the demand of huge consumptions of imported products.  Unless we export, even the best of government and Reserve Bank policies will be wasted.

But why are we consuming more, and producing less, causing the instability of the Kwacha in the process? I have three main reasons:

First, we are busy making more babies than money: The population of Malawi has risen alarmingly the past twenty years now at more than 16 Million. Rapid population growth, in the long term increases consumers not producers and keeps the people poor, in one way, because of the law of the diminishing returns. The more the people we add on a fixed amount of land, the less output is added by each and every one that is added. This means that the additional humans that we are manufacturing are only parasitic consumers whose input is not even needed to produce the desired output of our economy. Thus, the humongous population is only a regrettable increase in the number of millions of unproductive beneficiaries of public services that are financed by the few taxes, and foreign currency generated by a handful that are producing.

Second is lack of technology: lack of technologically advanced methods in production and service delivery leads to substandard products and services which are not competitive enough even on the domestic markets. Consequently people with money and government too prefer to import better quality products and services into the country, thereby depleting the very reserves that we need in order to stabilize the Kwacha.  The use of technology would also offset the pressure that the huge population growth is exerting on the economy. For instance, with advance agricultural technology, we could yield on the same fixed amount of land significantly increased production enough for domestic consumption, and exportable surpluses.  Our services too, would be efficient enough and increasingly accessible to meet the growing population, and attract foreign consumption while reducing the appetite for foreign products.

Third, we are all busy looking for someone to employ us: But who will employ who, when everyone is looking for someone to employ them? Job hunting increases the rate of unemployment. A Capitalistic economy can only succeed and grow where people are entrepreneurs and innovators. We must think more about how we can make money, without having to rely upon government or others to employ us for some wages. We must investigate our skills and talents and identify opportunities within which our skills and talents can be converted into money and wealth. We must cultivate the skills and talents so much that they are competitive for international consumption. Many people that consider themselves capable of self employment blame their failure on lack of capital. But if your talent and skills are good enough, they are the capital.

 

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Pido
Guest

Peter Adakamwaza K400M Just A Trip to America

fkr
Guest

Excellent and true article. Poor education should be number 1 on the list though.

Gimbogo
Guest

Let Governmet provide condusive environment for production surely the private sector won’t fail

Enock
Guest

Another issue is that we don’t add value to our products,most of our goods are sold as law materials hence they fetch low price @ the foreign market,and I agree with mr x as he said luck of technology which has made our products not to do well even at the local market how do you expect it to do better at foreign market

Mmihavani
Guest

Very very true. The writer is knowledgeable.

Amutchona
Guest
I read on another paper a writer arguing that weak currency does not necessarily mean weak economy. The problem in our case is that when our currency is weak it does not translate into more exports as we do not have a lot of exportable products. Hence I would argue that weak currency in our case will (without a doubt) lead to weak economy especially if the unavoidavble imports such as oil become more expensive. As to who is to blame: well you cannot divorce the government as it has a hand in everthying that goes on including those areas… Read more »
chuwa chimo
Guest

this is true, we are not living within our means, and pipo here are shortsighted, amaona kuchedwa, they want to start a busisnes today and see the profit tommorow.

Polandi Mbughi
Guest

Thats what we deserve.we had a chance to choose a leader so we did.

mitu
Guest

sindikugwiriza naye za chimanga chifukwa pali zambiri zoponsa chimanga ,kuli Beans,gnuts,peans,tomatoe,goats,apples abale pali zambiri we can exports these but we wait Gvnt to employe us Look Bunda students wait for BOMA

MP
Guest

current contributing factor to depreciation (and high inflation) is the CASH GATE scandal….too much money chasing few forex currencies….demand and supply issue

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