Reserve Bank of Malawi (RBM) Governor Dr Perks Ligoya has disclosed that the International Monetary Fund (IMF) “high powered team” will be coming in the country in December to help reform the exchange rate and look at devaluing the Kwacha currency.
IMF wants Malawi to further devalue the kwacha and liberalise foreign exchange before resuming the country’s Extended Credit Facility and cushion the foreign exchange shortages.
Malawi devalued its currency by 10 percent in August this year.
Ligoya, speaking on Capital FM Straight Talk programme monitored by Nyasa Times on Tuesday evening, said the official exchange rate is trading at 168 Kwacha to a US Dollar. The Kwacha has been trading at K150 to a dollar for many years.
The Governor said at the parallel market, the Kwacha is trading at 230 to a US Dollar.
“We have realised that there are these rates. The parallel rate and the official rate. And definitely we cannot sustain this,” Ligoya said.
RBM boss said IMF economists and Malawi technical team will hold talks from December 1 to 12.
“We will together prepare a report that will be definitive for Malawi to know what sort of exchange rate regime we’ll adopt so that we do away with the parallel market which is destroying this country.
“We realise that something has to be done but orderly,” said Ligoya.
He hinted that the Kwacha may fall against the international units such as the dollar.
President Bingu wa Mutharika, an economist himself, has been obstinate on the advice to devalue the local currency, arguing that he was protecting the poor.
“I have been arguing with the IMF to tell me how I am going to protect poor Malawians if prices for essential products go up if I devalue the Kwacha,” he is on record to have said, adding “they are not telling me anything, all they say is that we will find a way.”
IMF, mid this year, declared Malawi’s ECF programme off-track, leading to most donors withholding their budgetary support to the country.
Apart from liberalising the exchange rate, Malawi government would be expected to introduce other corrective economic measures should the ECF programme be revived, according to IMF’s resident representative in Malawi Ruby Randall.Follow and Subscribe Nyasa TV :