The Maravi Post

BLANTYRE--Malawian President Bingu wa Mutharika on Saturday repeated his stance that his poor southern African nation, where 39 percent of the 13 million citizens still live on less than a dollar a day, will not devalue the currency as demanded by the International Monetary Fund (IMF) or because “someone in Washington has eaten too much beans.”

“Why I am refusing to devalue the kwacha...it's because the youths who have no jobs and the poor in the villages will be made poorer. Devaluation will only benefit the rich and few Asians and those with big stores.”

Mutharika was speaking at the inauguration of an annual competition for various sporting activities the government bankrolls for youths at a stadium here. The competition is called the Presidential Cup.

“I am against devaluation because I want to protect you from commodity price rises. We can’t devalue the Kwacha simply because someone in Washington has eaten too much beans,” Mutharika said.

He said devaluation would only make “Washington people happy. If they smile in Washington, we will be weeping here. I will not devalue to safeguard you Malawians,” Mutharika said.

Saying Malawi was a sovereign state which had to decide its own economic destiny, Mutharika said Malawi “is our country and Malawians gave me power to lead this country.”

Mutharika, an economist, has launched an offensive on devaluation, accusing the IMF of “oversimplifying a very complex issue.”

He argues that a country that relies primarily on commodity exports doesn’t increase its exports through devaluation.

“We are discussing with them but, as at now, our stand is ‘No, no, no (to devaluation)’. These same people rallied against the Farm Inputs Subsidy Programme but the programme has improved the food security situation in the country. The same people were against the provision of free ARVs.”

Mutharika’s sentiments come in the wake of suggestions from the Malawi Confederation of Chambers of Commerce and Industry and Malawi Congress Party President, John Tembo, that government heeds IMF’s devaluation call.  

 The President, who ends his 10-year term in 2014, often argues that Malawian export crops such as tobacco, cotton, tea, coffee and sugar were “regulated by international commodity agreements and hence non-responsive to currency devaluation as a stimulant to export.”

“Devaluation has serious political, economic and social implications for Malawi,” he often says.

The central bank devalued the southern African country's currency by 10 percent last August as it sought to revive a stalled programme with the IMF.

The kwacha currency was devalued to 167 to the dollar from the rate of 150 to the dollar at which it had been fixed for many years.

Amid a worsening of ties between the country and donors, the IMF said in June last year its programme with Malawi was "off-track" as the government had failed to review a $79.4-million (55.7-million-euro) credit facility meant to cushion chronic foreign exchange shortages.

The IMF also says the official exchange rate remained overvalued, causing a persistent imbalance in the foreign exchange market.

Currently, the parallel market is 250 kwacha to a dollar, while the official exchange rate is 160 kwacha to one dollar.

This, the global lender argues, has led to foreign exchange market rationing and multiple exchange rates, saying this remained key deterrents to private sector activity, growth and diversification.
---
©2012 The Maravi Post. Reproduction authorised, with usual acknowledgment