RBM not devaluing Kwacha further

The Reserve Bank of Malawi (RBM) has ruled out any imminent devaluation of the local currency despite growing calls by analysts.

RBM Governor Wilson Banda said this in a statement, in response to current reports that the prevailing imbalances in foreign exchange rates are likely to prompt authorities indorsing another devaluation.

Widespread reports indicate that multilateral lenders like World Bank are advising authorities to realign the exchange rate to reflect the actual value to enable forex inflows.

This is happening at a time forex remains scarce in the country despite devaluing the currency by 25% in May.

However, the governor says the bank believes that the current pressure on the exchange rate is fuelled by these speculations and therefore not reflective of true demand and supply dynamics.

“ This is leading to market participants taking a wait and see approach to foreign 2 exchange transactions, which is compounding the situation further”, Banda says.

But some economists are still proposing a fresh 10% devaluation of the kwacha despite public fears that such a move would escalate soaring commodity prices.

Recently the World Bank Senior Private Sector Development Specialists Efrem Chilima, proposed a further re-alignment of the Kwacha, using a more flexible exchange rate management system.

An economics don from the Malawi University of Business and Applied Sciences (MUBAS) Betchani Tchereni has observed that the local unit needs to be devalued by at least 8 % to 10% regardless of attendant negative effects.

Responding to such, the Central bank Governor has since ruled out intention to devalue the kwacha further, saying there are measures that government is undertaking to address foreign exchange supply-demand imbalances.

The measures include revision of the Exchange Control to curb illegal externalization of foreign exchange.