LILONGWE-(MaraviPost)-The International Monetary Fund (IMF), this week backed Malawi’s proposal to introduce a MK5,000 new banknote, saying a higher denomination note will bring convenience to economic transactions that involves cash.
The Bank however, observes that the new note would attract a modest level of printing costs, which would affect the Central Bank’s profit.
IMF Resident Representative Jack Ree said, while there are worries that the MK5,000 note may trigger inflation, there is no empirical evidence that corroborates such a worry.
Ree added that larger denomination notes also make it harder to fight illicit trades, money laundering, and corruption.
The IMF Chief further observed that Malawi’s economy is continuing on its path of stabilization and the institution predicts this year’s growth of between 4 and 5 percent.
“Therefore, it’s a mixed-bag and we should set a limit at some point on how high the nation wants to go in terms of denomination. Setting the limit can be guided by a cost-benefit analysis and other countries experiences,” Ree said.
The IMF reaction comes a few days after Minister of Finance, Goodall Gondwe, the same week said the introduction of the new banknote would make it easier for people to carry; he also said the new note would be a cost-cutting measure.
Gondwe said the introduction of a MK5,000 note will save Malawi’s foreign currency reserves since it costs $8 million to order new banknotes.
But in the same week, Ministry of Finance Spokesperson Kutengule, backtracked his boss’ suggestion of introducing the note and argued that the Treasury has no such plans.
Kutengule observed that Gondwe’s sentiment was his personal view and not in line with the Ministry’s economic policy; he said the economy was on a right truck.
Since Finance Minister Gondwe announcement of the MK5,000 note, some economists observed that the development meant that the MK2,000 note, the highest note now, has lost value and Malawi’s economy was in crumbling.