PANAPRESS
Panafrican News Agency
Devalue or sink, IMF tells Malawi
Blantyre, Malawi (PANA) - The International Monetary Fund (IMF) insists that Malawi has to devalue its currency, the kwacha, if the southern African country's struggling economy is to be saved.
Tsidi Tsikata, the IMF Mission Chief for Malawi, told journalists in the capital, Lilongwe, on Saturday that an IMF team's assessment had found that economic problems being experienced in Malawi could only be addressed through a devaluation and liberalisation of the exchange rate.
Tsikata said the kwacha exchange rate should not be too different from that on the parallel market. He also said the private sector could be revamped if there were no controls on the exchange rate, a move, he said, could rein in spiralling commodity prices.
"The parallel (black market) rate has some risk premium in it but the official rate still has to move closer to that to correct the imbalances on the market," he said.
Economic analysts say the realistic rate of the kwacha to the US dollar, should be between 280 and 300, which are the prevailing rates on the black market.
But President Bingu wa Mutharika has resisted calls by the IMF and local economists to devalue the kwacha, saying such a move will cause a run on commodity prices that may hurt the poor.
Currently the IMF Extended Credit Facility (ECF) with Malawi is "off track" and Tsikata said its restoration depended on policy decisions by the Malawi government.
"It's really up to the government to decide whether to have a programme with the Fund," he said.
Several Western donor nations and multilateral aid agencies have suspended aid to Malawi not only because the IMF ECF programme is off-track but also because of concerns over deterioration of political and human rights in Malawi.
This has led to an acute scarcity of foreign currency in banks leading to unprecedented shortage of essential commodities like fuel and drugs. Many companies are also retrenching workers en masse because there is no forex to import raw materials for production.
The worsening political and economic situation has caused disaffection in the Mutharika administration culminating in an unprecedented anti-government demonstration during which police killed 20 unarmed demonstrators, thereby further straining Malawi's relationship with the West.
Finance Minister Ken Lipenga told the IMF press conference that the Malawi government was working on measures to address the economic problems.
"The package will form the basis for discussion with the IMF and other donors whose support will also be essential for the successful implementation of the measures," he said.
-0- PANA RT/MA 31March2012
Tsidi Tsikata, the IMF Mission Chief for Malawi, told journalists in the capital, Lilongwe, on Saturday that an IMF team's assessment had found that economic problems being experienced in Malawi could only be addressed through a devaluation and liberalisation of the exchange rate.
Tsikata said the kwacha exchange rate should not be too different from that on the parallel market. He also said the private sector could be revamped if there were no controls on the exchange rate, a move, he said, could rein in spiralling commodity prices.
"The parallel (black market) rate has some risk premium in it but the official rate still has to move closer to that to correct the imbalances on the market," he said.
Economic analysts say the realistic rate of the kwacha to the US dollar, should be between 280 and 300, which are the prevailing rates on the black market.
But President Bingu wa Mutharika has resisted calls by the IMF and local economists to devalue the kwacha, saying such a move will cause a run on commodity prices that may hurt the poor.
Currently the IMF Extended Credit Facility (ECF) with Malawi is "off track" and Tsikata said its restoration depended on policy decisions by the Malawi government.
"It's really up to the government to decide whether to have a programme with the Fund," he said.
Several Western donor nations and multilateral aid agencies have suspended aid to Malawi not only because the IMF ECF programme is off-track but also because of concerns over deterioration of political and human rights in Malawi.
This has led to an acute scarcity of foreign currency in banks leading to unprecedented shortage of essential commodities like fuel and drugs. Many companies are also retrenching workers en masse because there is no forex to import raw materials for production.
The worsening political and economic situation has caused disaffection in the Mutharika administration culminating in an unprecedented anti-government demonstration during which police killed 20 unarmed demonstrators, thereby further straining Malawi's relationship with the West.
Finance Minister Ken Lipenga told the IMF press conference that the Malawi government was working on measures to address the economic problems.
"The package will form the basis for discussion with the IMF and other donors whose support will also be essential for the successful implementation of the measures," he said.
-0- PANA RT/MA 31March2012
