JB says won’t reverse Malawi Kwacha devaluation: IMF chief defends move

Malawian President Joyce Banda has strongly maintained that  she won’t reverse the currency’s devaluation as consumer groups plan nationwide protests January 17 against soaring costs.

Banda is strongly maintaining that her administration will never bow down to pressure from some economists and rights campiaigners who are asking her to reverse the devaluation and floatation of the Malawi kwacha arguing  similar  economic policies have helped a neighbouring country Zambia to be categorized as middle income economy  by the World Bank.

Malawi devalued the kwacha by a third against the dollar on May 7, a month after Banda took office, and agreed to let the exchange rate float to meet conditions set by the International Monetary Fund. Since then, the currency has dropped 26 percent to 326 per dollar, making it the worst-performing unit in Africa. Inflation in the southern African nation surged to 33 percent in November from 30.6 percent in the previous month.

“Please don’t comment on issues of economy when you are not competent. Leave issues of the economy to the economists,” said President Banda  on Saturday at a political rally held at Traditional Chadza’s headquarters in the capital Lilongwe.

MF Managing Director Christine Lagarde is greeted by Malawi’s President Joyce Banda on arrival at Kamuzu Palace in Lilongwe

“ Ask Zambia, a dollar is now equivalent 5,000 Zambian Kwacha yet the World Bank has declared the country a middle income earner,” said Banda.

President Banda therefore said the devaluation of kwacha won’t be reversed as demanded by some people saying it has helped the poor tobacco farmers get good prices of tobacco at the market. She said before devaluation, farmers were selling tobacco at $0.50 per kilogram but just a week after devaluation the same tobacco was going at $2 per kilogram.

“Wasn’t that nice? So what wrong with devaluation?”

Banda said the visiting of the Managing Director of the International Monitory Christine Lagarde confirms her government’s sound economic policies. She said Laggard had previously refused to come to Malawi when she approached her because of poor economic policies but promised to visit Malawi once the economy is in the right track.

‘Critics are jealousy’

However Banda admitted that her government assumed office without clear policies of how she could address economic problems perpetrated by the late president Bingu wa Mutharika’s administration.

“It is God who chose me and this means that I entered the government unprepared because some people were even blocking me from entering into government even after the death of the president”.

This was an apparent reference to six cabinet ministers in the DPP administration who held a midnight press conference before official announcement of Mutharika’s death saying though Joyce Banda was the vice president she was not illegible to succeed the late Mutharika because she was not a member of the then ruling party.

Banda also describes her critics as being jealousy of what she called her fame for speaking against her frequent local and foreign trips which they say are draining the country’s resources.

“To be recognizing as most powerful woman in Africa is not a joke and those people who recognized me are not mad. Yes I have traveled a lot because most of the trips are funded by those who were inviting me. Therefore some people are criticizing me just because they are jealousy of my fame and not my trips,” she said.

She however assured Malawians to be patient saying the end of economic problems they are facing is near.

IMF defends devaluation

IMF Managing Director (MD) Christine Lagarde on Saturday strongly defended the devaluation of the Kwacha as the only option Malawi had to get the economy back on track.

Lagarde said this during her interaction with the Parliamentary Budget and Financing Committee at Paliament Building in Lilongwe where she attended to a number of concerns from the committee on the state of the country’s economy.

During the meeting, legislator for Lilongwe Central and member of the Finance and Budget Committee, Lobin Lowe, queried Lagarde as to whether  IMF is “a true friend to Malawi”  considering how the Fund’s advice on the devaluation and floatation of the Kwacha impacted on the citizens’ livelihoods.

In response the IMF boss  said : “IMF is a true friend to Malawi and we are here as caring friends ready to assist the nation regain its economic stand,” said Lagarde, adding, “if there was any easy option, believe me, we would be the first to offer it, but based on the situation and what neighbours around had been doing, we felt devaluation was the only cure for the problem.”

She said the Fund “does not set prescription that the country has to swallow” but that the realities of the economy dictate the right way out.

“The country was importing massively as compared to exporting and a lot of reserves were lost by the day,” explained the IMF Managing Director, “for a better economy Malawi had to reduce imports and increase exports; devalue the currency to make her commodities valuable and increase interest rate to stabilize the economy.”

Lagarde added that Malawians should persevere the hard times they are going through saying the economy would soon get full recovery following the devaluation and floatation of the Kwacha.

“You have hit the bottom and you are now climbing out and it is your responsibility to explain this to the people,” the IMF chief challenged the Parliamentary Budget and Finance Committee members.

She said most countries which went through similar process such as Russia, Ghana and Seychelles had gone back to IMF and said ‘We are glad we did it’ hence; there was no need for Malawi to worry.

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