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Opposition cautions government on devaluation

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Sosten Gwengwe

Leader of opposition in Parliament Kondwani Nankhumwa has warned that the 25 percent devaluation of the Kwacha will make Malawians poorer, unless the government implements stringent expenditure control measures and devises more social protection policies.

In a statement released on Saturday, Nankhumwa says the price of fuel is expected to rise, which could push up transport costs and prices of other commodities and services including electricity.

Nankhumwa said devaluation means that the 12 percent salary increase that civil servants got in the 2022- 23 financial year has all been wiped out.

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“The private sector will shrink as the already high cost of production will now double, or even triple. In some cases, it will even quadruple.

“Meanwhile, the salary will be the same and the Malawi Revenue Authority (MRA) will not change its tax calculation on the same wiped out income, thereby throwing businesses and the people into bankruptcies and [fuelling] the cycle of poverty,” he said.

He further proposed expenditure control measures such as a cut on trips by the President and government officials, salary cuts for the president and his vice, recruit more people on the cash transfer program, and ban some imports.

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“I wish to urge President [Lazarus] Chakwera to immediately call for an emergency meeting of Parliament for MPs to review the K100, 000 tax-free band for Paye and other taxes that have negative impact on poor Malawians, especially following the devaluation of the Kwacha,” Nankhumwa added.

Defending the decision to devalue the local currency, Reserve Bank of Malawi Governor Wilson Banda said the decision has been done in reaction to market trends and with the intention to give the Kwacha its true value.

“It is a decision we have taken as the central bank looking at economic trends. The measures taken are enough to collect the challenges. It is drastic but necessary,” Banda said on Friday.

Minister of Finance Sosten Gwengwe said, already, the Treasury has moved to adopt some yet to be announced tighter monetary policies and measures.

“We are also moving so fast in looking at containment measures, especially on public spending. That means we will have a very tight fiscal regime. We are taking measures that, when the economy stabilises, then we should be able to see stability of prices, interest rates and the rest of the macroeconomic indicators be moving towards the right direction,” Gwengwe said.

Economics Association of Malawi Executive Director Frank Chikuta said the country was in a situation where corrective measures, including devaluation, were inevitable, despite the possible pain they would cause.

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