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John Kapito hits at government over depreciation

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As the Kwacha continues to lose valuable ground against major trading currencies, the Consumers Association of Malawi (Cama) has expressed concern over the authorities’ failure to put in place lasting measures to halt the slide.

The kwacha, which traded at around K430 to the dollar last month, was trading at around K520 in selected foreign exchange bureaus in the country’s cities, despite being in the middle of the tobacco-selling season.

The development has sent shock waves among consumers who have wondered as to where the local unit will be during the lean period of between October and February.

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Cama Executive Director John Kapito on Wednesday said it is depressing and confusing that at a time when government has been making claims that the economy is back on track with huge forex reserves and inviting foreign investors to come to Malawi, the kwacha has started misbehaving.

“Unfortunately, the current depreciation of the kwacha is coming at a time when the economy is already bleeding, when the consumers’ incomes are already eroded.

“Most Malawians are currently unable to meet the cost of their daily needs and most manufacturers and traders are unable to produce and sell more goods because demand for such goods and services has diminished because of the high prices mostly influenced by the depreciated kwacha,” he said.

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Kapito said all progressive economies throughout the world have the ability and capacity to adjust their exchange regimes in the interest of the people.

Kapito observed that unfortunately, the depreciation of the kwacha is coming after most tobacco farmers have already sold their tobacco. And now the very same farmer is expected to buy the farm inputs at the new inflated prices.

“This is an insult to all Malawians who have been misled by this government that it will manage the economy and that the fruits will be shared with the rest of the population. Unfortunately, the sudden huge drop of the kwacha remains unexplained by government and how the incomes of the poor consumers will be mitigated,” he said.

Reserve Bank of Malawi (RBM) spokesperson Mbane Ngwira, last week, observed that the country is currently sitting on a good buffer of foreign exchange reserves.

Ngwira attributed the recent fall of the kwacha on speculative tendencies by players in the forex market.

“There is no need to start pressing the panic button as the country has over three months of import cover. The recent depreciation could be attributed to position taking by market players in the industry,” said Ngwira.

Ben Kaluwa, an economics professor at Chancellor College last week described the sharp fall of the kwacha as worrying.

“This reflects the dynamics of supply and demand and there are concerns that banks are not as responsive to demands of the market. So, the currency is getting weaker as there have also been aid flow problems among others,” said Kaluwa.

The country’s gross official reserves dropped to US$747.89 or 3.58 months of imports on Tuesday from US$749.69 or 3.59 months of imports last Friday.

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