Informal, parallel markets worry analysts

Concerned with the slow and painful collapsing state of Malawi’s economy, some market and academic analysts have voiced to government loudly to check the growing influence of the informal sector which is now running a parallel economy for the country.

Currently forex and fuel is a rare occurrence in banks and fuel service stations respectively but the two are readily available on the black market.

This is leaving the corporate sector, SMEs and consumers little choice but acquire forex and fuel at very high costs.

Because of forex scarcity local manufacturers of basic commodities such as cooking oil, bread, salt and soap have dropped production by almost 60 per cent which is the end is leaving few products on the market being chased by more money.

With the application of market principle of demand and supply prices of goods are going up because of low supply and increasing fuel costs resulting in traders passing on business costs to consumers.

Factor in all this, Malawi is another economic failure in the making as very soon it is poised to have highly super inflation figures as its cousins in Zimbabwe.

Catholic University Senior Lecturer Vincent Kondowe said the continuing deteriorating state of the economy has exposed many common citizens and government’s lack of action to protect them is doing too much harm.

“In the parallel economy being run by the informal sector, forex and fuel is available and not the central systems of government and this has led to costly livelihoods what government must do is to flood the market with forex or wait for another tobacco marketing season to have more forex in the system. This will stabilise and then they may consider devaluation otherwise devaluing without the supply will just harm us more,” said Kondowe.

A market analyst and social commentator said people who buy forex on the black market do so because the official Kwacha rate to the forex is overvalued by a government that does not know its economics.

“If we go to Malawi with US dollars today, we will buy our Malawi Kwacha on the black market because it will give us a more realistic value for our US dollar. When we want to buy US dollars using Malawi Kwacha, we will go to the banks because, the Kwacha being overvalued by a government that does not know its economics,” said the analyst.

He said these are the reasons why forex has been drained in Malawi banks.

“This has drained the forex from banks, and our official foreign currency reserves. Buy US dollars on the black market using an overvalued Malawi Kwacha, is because of unreasonable and ignorant restrictions imposed on banks as to how much forex they may sell to an individual,” he said.

Apart from the fuel, forex shortage Malawians are facing consistent power failures and scarcity of many products imported from other countries such as car spares and electronic items.

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