IMF's presence heightens Malawi kwacha devaluation fears

The presence of experts from the International Monetary Fund (IMF) who flew into the country last week has led to more fears and speculation from the market about how much the Kwacha would be devalued.

Analysts say it is clear that when the IMF mission is through with its task of putting the local economy in the lab and the direction the team would give is at how much the Kwacha should be trading against the US dollar.

Officially US$1 is going at K165 but the reality on the market is that it is US$1 for K200 and on the black market its already at K260 per US$1.

With this scenario analysts forecast that the experts jointly led by specialists in the name Etibar Jafarov and Nadia Rendak would recommend that the Kwacha must be devalued further to K300 per US$1 as a way of leveling the sell of the dollar with the reality on the market.

But the impact from this they say will be escalating costs of commodities on the market and erosion of cash savings value.

“This is why we always recommend that those who have cash must invest in assets such as property where one is assured of cover in case a currency loses value they are assured that the property will be pegged accordingly,” said the analyst.

The IMF has made it clear that the duty of the squad, which it says has wide experience in monetary legal and capital markets, is to review the Foreign Exchange Control Act plus change pertinent laws and foreign exchange regulations.

Results of the loopholes and failures in the economy would be given to government for the final decision to provide a platform to return to the IMFs programme which went off tract early this year.

This was the reason for countries and donors withdrawal of over $500 million in budgetary support to Malawi’s 2011-2012 national budget.

The withdrawal of such a magnitude of donor support in the budget affected forex reserves and led to shortages which ended up in low availability of almost everything ranging from fuel, drugs to even soft drinks.

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