Loosen Grip on Kwacha—IMF
The International Monetary Fund (IMF) has repeated its recommendation that Malawi should devalue the Kwacha.
Speaking to journalists in Lilongwe, after a two week economic assessment head of the special IMF mission Tsidi Tsikata said government should now let the Kwacha determine its own value against other foreign currencies.
“the country is grappling with a severe foreign exchange shortage that contributed to a slow down in the economy from 8.3 percent in 2007-2010 to 4 percent in 2011” he says.
President Mutharika has on several occasions rejected calls to devalue the local currency arguing that doing so would hurt the poor as prices of basic goods would sky rocket.
Mr. Tsikata added “the mission has therefore recommended a package of policies including adoption of a flexible exchange rate regime to counter this”.
He says standard rates of the kwacha against any foreign currency would be done by monitoring prevailing rates in exchange bureaus.
The official exchange rate is decided by the Reserve Bank and currently stands at K165 to a Dollar but on the parallel market it is selling as high as K300 to a US Dollar.
The mission chief says countries like Ghana, Tanzania and Uganda adopted the system and “it’s working”.
Finance Minister Dr. Ken Lipenga, who hosted the IMF team, said government will look into the recommendations before taking action.
He also announced that authorities are formulating a comprehensive package of measures to address the crisis.—Zodiak Online
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