The Reserve Bank of Malawi (RBM) has said policy and behavioural realignment remain among medium to long-term remedies to the acute forex shortages Malawi is experiencing.
RBM Deputy Governor Kisu Simwaka said this at a breakfast meeting hosted by the Bankers Association of Malawi (Bam) in Blantyre on Friday.
The sentiments come at a time the local economy is hard hit by an acute shortage of foreign exchange, which has seen the proliferation of the parallel market, where the exchange rate is pegged at above K4,000 to a United States dollar.
The spread between the rate in authorised dealer banks and the black market remains glaringly wide as the official rate is seen at K1,750.
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According to Simwaka, further devaluation of the currency is not an imminent remedy as it would be construed as chasing the parallel market rate.
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“ Fundamentally, the issue is not about exchange rates, because we can have the exchange rate anywhere we want, but that will not bring us forex. The issue is about production and exports,” he said.
Simwaka said, already, the central bank was working with commercial banks in shaping policy instruments that would see a tilt of bank loans to the productive sector rather than consumption.
He said the idea was to incentivise the private sector to enhance production for the export market while propagating lowering of imports.
“It means we must realign our policies through financial institutions so that lending is now going more towards production and exports than is the case currently. We know, currently, that most of the lending is going towards consumption and that is not good for the economy,” Simwaka said.
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Bam First Vice President Noel Mkulichi said the banking community was equally affected by the situation, hence positioned to work on finding remedies.
“For sure, we need to increase production levels. As things stand, the forex situation is being exacerbated because we are more of an importing nation than an exporting one.
“We need to increase production levels so that we should be able to realise more and be able to generate more forex,” Mkulichi said.
