Malawi Kwacha devaluation to boost exports-expert

While there is jittery and panic among Malawians on decision by central bank to devalue kwacha, an eminent economic expert Desmond Dudwa Phiri  (DD Phiri) says Malawi would in long run come out strong economically but asked government for “protective cover” on its citizens.

Phiri a veteran economic pundit said with devaluation Malawi will reap from exports of local products which he said would be cheaper on international market hence creating demand.

At the same time, Phiri added that devaluation will take away appetite for foreign products as they would be expensive.

“Yes there are serious concerns on the part of Malawians that devaluation will bring with it difficulty times ahead, that cannot be denied. However, there is light at the of the tunnel because demand for local commodities will be boosted at the same time appetite for imports is going to slow as prices for foreign goods will be high,” explained Phiri.

K500, Malawi's largest legal tender

However, the learned economist was quick to urge Malawi government to come to the rescue of Malawians by providing what he called a “protection cover.”

Commenting on reports that prices of goods have already started to skyrocket, Phiri told Nyasa Times that such development is inevitable.

“In the first place I trust the government has already discussed with the international monetary institutions to provide a mattress as protection cover otherwise life will be hard for Malawians.

“Yes I understand prices of basic commodities are increasing but that is inevitable as it is one of domino effects of devaluation. However, looking at the bigger picture Malawi will soon get back on track due to the political will that has helped to attract foreign aid,” added Phiri.

According to Phiri fear of rising inflation as feared by some quarters can be mitigated by the bumper harvest as many households are harvesting hence have food in their homes.

Malawi through the Reserve Bank ended months of market expectations by devaluing the kwacha by 48 percent a move which was described by the bank’s governor Charles Chuka as big sacrifice.

Meanwhile, a visit to some commercial banks in the city of Blantyre Wednesday morning by Nyasa Times reveals that kwacha has slightly fallen against the American dollar. Most banks are trading the kwacha at MK252 representing a MK2 increase from the recommended MK250.

This according to one of the country’s largest banks in terms of assets the National Bank of Malawi (NBM) is in line with liberalization of the exchange rate by the central bank.

“With liberalization each bank is free to set its own exchange rate depending on demand and supply,” the banks spokesperson Anne Magola told a local daily.

Most economists agree that the new exchange rates should help attract foreign investment, thus increasing the country’s foreign exchange reserves and making it easier to import those things that had become so scarce in late Bingu wa Mutharika’s last months: medicine, for example, and petrol. The devaluation will also make Malawi’s exports much more attractive on international markets.

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