As we speak, people are weeping and wailing because the Malawi Government has devalued the over-valued currency the Kwacha, which was not backed by any foreign exchange reserves, nor any export commodities of note, save for tobacco.
In the face of tobacco’s increasing poor performance, Malawi’s major source of foreign exchange are grants from bilateral and multi-lateral donors and loans obtained from mainly the International Monetary Fund (IMF) and China.
China is a specialist in commodity /infrastructural aid and rarely provides cash; therefore this leaves Malawi at the mercy of the IMF, when donors refuse to play as was the case due to the late President’s policies.
Now a new breed of economists, who by the way include former presidential legal counsel Allan Ntata – no doubt disciples of the Economist-in-Chief, are all over the place crying louder than the bereaved for their beloved departed Economist-in-Chief and his policies which were driving Malawi towards dollarization – Zimbabwe style.
There is no doubt that the effects of the devaluation, since this has been artificially buttressed and accumulated over many years, will be severe.
This raises several questions, which Nyasa Times now throws back to you:
1. Honestly speaking were there any options other than to devaluation? Spell out the options, if any.
2. Should we have been devaluing the Kwacha gradually from 2007 when it became clear that the Kwacha’s artificial valuation did not reflect its real value on the market?
3. How can we avoid a repeat of this situation in future?
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