Malawi Government plotting huge devaluation of Kwacha

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Kabambe

Former Reserve Bank of Malawi (RBM) Governor Dalitso Kabambe says the Lazarus Chakwera administration has introduced forex auction in order to silently devalue the Malawi Kwacha and blame the devaluation on the private sector.

Kabambe said this on Friday following RBM’s announcement of periodic foreign exchange auctions aimed at determining and maintaining clearing price for the Malawi Kwacha against the dollar and other currencies.

According to RBM, Authorized Dealer Banks (ADBs) will be submitting bids to sell foreign exchange to RBM at rates determined by each ADB.

“These auctions will facilitate the discovery of a prevailing market clearing exchange rate for the Malawi Kwacha against major currencies and thereby promote transparency in the determination of the exchange rate,” reads part of the statement.

However, Kabambe, who was RBM governor during the Peter Mutharika administration, has described the move as astep in a wrong direction.

“It is the lack of financial prudence and sound economic principles that has forced this administration to resort to this measure,” he said. “As it is we can simply say that the Kwacha is being devalued silently with the government opting to heap the blame on the private banks.”

Kabambe, who has shown interest to replace Mutharika as Democratic Progressive Party (DPP) president and contest in the 2025 elections, said what is now needed is to build systems that can attract investment in order fix the economy.

He, however, argued that the Chakwera government has already shown that it cannot fix the economy since whenever the government does that, it leaves prices skyrocketing and basic goods not being available.

According to Kabambe, the solution lies in overhauling the whole system and getting a capable leader to steer the ship.

“We need a leader who can have rich discussions with his economic advisors and fully understands the depth of any decision he makes. Because even if you bring whatever expert here, as long as the leader is cosy to the corrupt and can’t take the crucial decisions let alone implement his own austerity measures,” said Kabambe.

In May, the Chakwera administration devalued the Kwacha by 25 percent, leading to a rise in prices of goods and services. Despite the negative effects of the devaluation, Chakwera defended the move saying it was a necessary evil in order to fix the economy.

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