The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) says Malawi’s persistent high interest rates are a result of the Reserve Bank of Malawi-
RBM’s faulty way of fighting inflation.
RBM and the International Monetary Fund (IMF) have, however, defended the decision to increase the policy rate of interest, saying the move is necessary in the wake of recent developments in the economy.
MCCCI Chief Executive Officer, Chancellor Kaferapanjira, in an interview with the The Daily Times in Blantyre, however, described the increase in lending rates as a “misplaced” and “shortsighted” way of fighting inflation.
He argued that a sustainable way of fighting inflation is to encourage production of goods and services as it is their mismatch with demand that creates inflationary pressures on the market.
He said the current monetary policy stance by the RBM is killing all efforts to move the economy forward.
“No policy maker should take any pride in policies that bear no long term fruits for the country,” said Kaferapanjira.
“Malawi needs a monetary policy environment that encourages long term investment, such as manufacturing, for the country to take off,” he said.
“This kind of decision making is what has exterminated any prospects for Malawi to move forward economically.
RBM makes decisions that are suitable for developed countries with nearly full employment of its factors of production.
“These decisions are not appropriate for Malawi and cannot help this country advance.
No wonder we are backtracking instead of moving forward,” he said.
He said RBM’s policies are generally text book oriented and written by Western economists for application in their economies and that they are being implemented in Malawi without modification to take into consideration local realities.
“Malawi like other developing countries needs a more developmental central bank, just as the now developed countries had development oriented central banks that helped them industrialise,” said Kaferapanjira.
“The policies currently being employed by RBM are misplaced and cannot take this country anywhere. Malawi needs monetary policy-makers that are practical to the situation, not rigid in their thinking,” said Kaferapanjira.
However, RBM governor Charles Chuka has, however, defended the monetary policy stance, saying it was inevitable given the tough times the economy is passing through.
“The expressions of displeasure from some quotas are understandable as we have had high interest rates for more than three years now,” said Chuka, who also chairs the Monetary Policy Committee (MPC).
IMF resident representative Geoffrey Oestreicher also told journalists over the weekend in Mangochi that the policy rate hike was appropriate given the need to fight inflation in the economy.