By Chisomo Phiri
BLANTYRE-(MaraviPost)-The Reserve Bank of Malawi (RBM) Governor Wilson Banda insists that the decision of devaluing the Malawi Kwacha by 25 percent has been influenced by the International Monetary Fund ( IMF) officials who are in the country.
This follows public backlash over RBM decision that the move came due to the pressure from the IMF officials who are in the country holding talks with the county’s central bank.
But addressing the news conference on Friday May 27, 2022 in Blantyre Banda said the decision is not a pressure from IMF officials as argued.
He said the bank had decided to devalue the Kwacha alone in order to stabilize the country’s economy which has been not stable due to the effects of COVID-19 pandemic, Cyclones Ana and Gombe,and more recently the Russia-Ukraine war.
” No, this is not an influence or pressure from IMF. This decision had already been there before the IMF officials come into the country.
“We have done this as a Reserve Bank of Malawi so as to stabilize our county’s economy which has been affected by COVID-19 pandemic, Cyclones Ana and Gombe, and more recently, Russia-Ukraine war. So, this is not a decision by IMF,” insisted Banda.
The Governor said the excessive borrowing of money by the government which happened between 2016 and 2020 to support fix the exchange rate is what has also greatly contributed to the move as this is giving the bank a pressure to repay the amount which has not been completed till now.
Banda added that on top of stabilizing the Kwacha, RBM believes that the devaluation will also help in realigning the currency with other market fundamentals which will allow the economy to grow.
“We believe that devaluing the currency is also part and parcel of realigning it with the market fundamentals so as to allow our economy to grow
“Here we mean that even tobacco which is our main export commodity will earn more on the market thereby making the country’s economy to grow as well as benefiting the cash crop farmers,” he added.
The Governor assured that with the currency devaluation, the Malawians should expect more forex presence in the country, fuel abundance as well the availability of drugs in the hospitals.
Banda concluded that to stabilize the exchange rates, the RBM will tighten the monetary policy so that there is no excessive borrowing that could result in inflation, while the government will help in tightening the fiscal policy on the same.
In 2012, RBM devalued Kwacha with 33 percent which resulted in the currency start gain and later stabilizing a resumption of fuel supply in the country.