By Draxon Maloya
Malawi is facing unprecedented economic turmoil as the Reserve Bank of Malawi (RBM) announced a shocking 44 percent devaluation of the Kwacha on November 8th, marking the second devaluation this year.
This move, justified by RBM Governor Wilson Banda as a necessary evil to align foreign exchange supply with macroeconomic fundamentals, contradicts the RBM’s earlier assurance on October 28th that there were no plans for currency devaluation.
“The supply-demand imbalances remain in the market despite adjustments of the exchange rate through the auction system, arbitrage opportunities have resurfaced in the market due to the mismatch in exchange rates in the cash and TT markets and indicators of market abilities to clear import bills at this rate,” reads the recent RBM statement.
Economic expert Betchani Tchereni believes the devaluation was long overdue to sustain forex availability, albeit at the cost of rising prices for goods and services.
“Despite that the donors maybe the ones to appreciate, the devaluation is not a proof enough that the action is as a result of pressure from the donors and IMF in particular. But it will be a bit hard to convince a common man in the village,” Tchereni said.
Former RBM Governor Dr. Dalitso Kabambe criticized the timing, especially in light of the prior conditionalities for Extended Credit Facility (ECF), expressing concerns about the lack of fiscal consolidation.
Kabambe warned that this reckless devaluation, coupled with a 69 percent devaluation throughout the year, would exacerbate the economic meltdown, causing basic goods and services prices, including fuel, fertilizer, and food items, to soar.
“There will be no recovery from the macroeconomic meltdown making the suffering experienced by Malawians worse, as prices of basic goods and services such as fuel, fertilizer, and food items will soar,” said Kabambe.
While RBM insists that their actions are not influenced by international pressures, the impact on ordinary Malawians cannot be ignored.
The inconsistency in RBM’s policies has deepened the country’s economic crisis, leaving the population to bear the brunt of essential goods and services’ unavailability and skyrocketing prices.