MCCCI blasts Reserve Bank of Malawi over Kwacha teetering

The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) has lambasted the Reserve Bank of Malawi (RBM) over  RBM’s claims that the Malawi Kwacha will stabilize in the near term, describing them as “misleading to the business community and even the nation as a whole” MCCCI argues this is unlikely to happen “without a solid creation of foundation base”.

“Based on the status quo, it is anticipated that the local unit will continue depreciating and its depreciation can only be stopped unless the government comes up with necessary strong fiscal and monetary policy measures to tame its unstableness.

“In the meantime the business sector should continue be on a lookout and stay agile in their operations, as the local currency uncertainty and other macroeconomic fundamentals are perceived to continue,” reads an MCCCI statement on Wednesday.

MCCCI statement is in response to an RBM statement about the causes of the Kwacha depreciation and outlook in the near term, which the bank issued on January 28, 2016 in light ofa sharp and longer than anticipated depreciation of the local unit since July, 2015.

In its statement, MCCCI says it aims to provide“its position on whether RBM’s near term prospects on Malawi Kwacha stability are practically achievable”.

MCCCI dismisses RBM’s argument that the persistent massive depreciation of the local currency in which the country is experiencing now, “is a normal thing other than an economic crisis”.

“Being a highly importing country, unstableness of the Malawi Kwacha is seriously affecting the operations of most businesses in the country and hence reducing private sector activity. While noting the fact that the local unit stability is threated by the lagged impact of uncontrollable challenges in 2015 like the weather related shocks, the key challenges falls under the auspices of lack of effective economic governance or deliberate efforts to implement relevant reforms that can tame the local unit to stabilize.

“Practically, we all know the fact that the local unit massive depreciation emanates from the weak export base in which our economy has. The question is, till when should we continue to rely on tobacco export proceeds? And yet we have a lot of strategic commodities that can bring in a lot of foreign currency and then stabilizing the local unit, as articulated in the country’s National Export Strategy (NES).

“Another point which raises a lot of questions is the RBM’s comparative analysis of the performance of the other countries’ currencies with Malawi Kwacha after liberalization,” reads the MCCCI statement in part.

MCCCI agrees with RBM that it takes a long time for the currency to stabilize once it has been liberalized.

However, MCCCI argues that what RBM could have been telling Malawians is for how long did it take for the referred countries’ currencies to stabilize after being liberalized, “and not just giving us a percentage that in Zambia it depreciated this much after liberalizing”.

“Yet our local unit has already lost value according to their calculation of 338% in just four years, and we are not even sure for how long will such situation sustain,” reads the MCCCI statement.

According to MCCCI, the private sector remains the engine for economic growth and unless and until policies and regulations aim at building the productive base, such economic challenges will not subside.