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Mixed fortunes after Kwacha devaluation

Tobacco market in Mzuzu

Leonard Chimwaza

The recent 25 percent devaluation of the Kwacha has weighed differently on various sectors of the economy, including the mainstay agriculture, where commentators are calling for a review of minimum farm gate prices of commodities.

The local unit was devalued on May 27 2022 by 25 percent as part of the government’s desperate attempt to have a new International Monetary Fund (IMF) Extended Credit Facility (ECF) programme in place to help cushion it from prevailing economic woes.

The Reserve Bank of Malawi indicated that the move was aimed at realigning the value of the Kwacha to market trends at the time.

In an interview, President of Tobacco Association of Malawi Trust Abiel Kalima Banda said the option remains good to tobacco farmers as it meant an increase in earnings for them in Kwacha terms.

“Whenever the local unit tumbles, it is good news to tobacco farmers; for example, before the devaluation we could get K825 per dollar made from tobacco sales but, after the devaluation, we are getting K1,100 for the same volume of tobacco pegged to a dollar,” Banda said.

In a separate interview, President of the Cotton Farmers Association Dickson Gundani said they are not benefitting from their labour following the development.

“After the devaluation, automatically the true value of the price came to K375 per kilogramme (kg) and not the K500 on offer. We had a meeting with the cotton authorities and they say we have to negotiate with the buyers but it will not bear any fruit.

“The buyers are also saying prices on the international market are fluctuating and, therefore, cannot make any consideration in regard to the devaluation; so, we have left it in the hands of the authorities to come to our rescue,” Gundani said.

Agriculture expert Leonard Chimwaza sided with Gundani, saying, at the current price of K500 per kg for cotton, the farmers will not be able to procure inputs for the coming growing season.

“Prices for the inputs have risen and for the farmer to be able to procure enough inputs, they need to get more money from the current sales,” Chimwaza said.

But Ministry of Agriculture spokesperson Grecian Lungu said they will only revise the farm gate prices for next season.

“When we come up with the farm gate prices, we consider the cost of inputs and what we recommended for the current marketing season had considered what they spent to produce the crops. The other factor is those are the minimum prices and we live it for market forces to determine the value of the crop; for example, maize, we set it at K220 per kg but now, in some areas, it’s at K300 per kg,” Lungu said.

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