IMF Wants MK at MK250 to US Dollar
The International Monetary Fund insists that the Malawi Kwacha must be devalued to between MK230 and MK250 to the US dollar if the bedridden economy is to be resuscitated.
The IMF observes that the current rate MK165 is an “overvalue” of the local currency and not in tandem with the current trends on the ground.
Currently, the kwacha is changing at MK230 to about MK255 on the parallel market.
An IMF report in our possession suggests that putting the official rate at the black market level would push the unaccounted for forex on the parallel market into the formal market.
The report is a result of the IMF mission to Malawi from December 1 to December 12, 2011 which was request for by the Malawi government.
“Specifically, the mission worked with the MFDP and Reserve Bank of Malawi (RBM) to develop an action plan that would allow the Malawian authorities to achieve the above objectives,” read the introduction in part.
This discovery comes when President Bingu wa Mutharika has insisted he would not allow to further devalue the kwacha arguing doing so would hurt the poor.
But IMF insists on the economic ‘mouth to mouth resuscitation’ for Malawi through the devaluation of the Kwacha.
“An overvalued exchange rate, in turn, has led to foreign exchange market rationing and multiple exchange rates, which remain key deterrents to private sector activity, growth, and diversification,” says the IMF in a report yet to be vetted by the Malawi government.
The current Forex shortages have largely been blamed on reduced aid inflows and an exceptionally poor tobacco market.
Malawi’s tobacco earnings dropped by 30 percent, this year.
However, President Bingu wa Mutharika has apportioned his blame on Satan, opposition and most recently, international chain stores.
The IMF advises that the Malawi government should allow the Kwacha to freely float and adjust to market forces than the current “artificial” situation.
While in Malawi, the IMF group - comprising Messrs. Jafarov (Co-Mission Chief), Eckhold (both MCM), and Jonassen (Norges Bank) and Ms. Rendak (Co-Mission Chief; LEG) – met officials from the Finance Ministry, Reserve Bank of Malawi, selected commercial banks and selected Forex Bureaux. - Zodiak Online
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