Africa-Press – Malawi. Nothing, not even an official exchange rate that lags far behind the rate proffered by the black market, prepares the ordinary Malawian for the moment the Kwacha tumbles.
Which is, somehow, understandable because nobody wants painful things to unravel right before their eyes. It is better to learn, later, that the expected has happened than to see the expected happen.
I know some people will disagree with me. They will say Manchester United has not been getting the best experiences on the football pitch right now, but that the team’s supporters have been behind it through thick and thin.
Fine and well. Maybe Manchester United supporters— actually, most of them, especially those who rally behind it in Malawi, are ‘fans’. They are not supporters because they just support the team on the screen, without having to pay membership fees— are the exception.
Normally, though, people do not want to be witnesses to a situation that is getting out of hand. As such, I understand the sense of trepidation among those who feel hard done by following the Reserve Bank of Malawi’s Wednesday announcement that it had let the Kwacha loose by 44 percent.
It is like the Kwacha, which was ‘gathering momentum’ has finally descended into an endless hole of pain. Yes— Dear Pain— hole of pain. Some people are definitely blaming the development on Malawi’s prospects of securing an Extended Credit Facility (ECF) programme with the International Monetary Fund (IMF). They feel that the IMF is behind this.
Of course, the IMF will say it has nothing to do with this— the way the Breton Woods institution denies putting a cap on the number of people Local Government and Central Government institutions can hire annually, ostensibly to ensure that the wage bill is not bloated.
Of course, the IMF will maintain that Malawi— through the central bank— made the decision to realign – as they are putting it— the Kwacha’s official exchange rate with that of the black market, where United States dollars have been flowing as freely as the Shire River while authorised dealer banks have been starved of the same.
Whatever the case, the margin of the depreciation has shocked Malawians, most of whom get less than the minimum wage of K50,000 per month and the government does nothing about it.
This was evident on social media, where some Malawians vented their anger on those they feel have abandoned Ubuntu [Umunthu] principles, such that they are looking at things only in reflection to themselves.
Who can blame them. After all, after months of hesitation, the central bank finally announced a whopping 44 percent devaluation of the local unit, coming closer to the 49.50 percent slump effected by the Joyce Banda administration in May 2012. This means the dollar has, from yesterday, been selling at K1,700 from K1,180.29.
The central bank has justified its decision, saying the decision to devalue has stemmed from its assessment of the Kwacha, which showed that supply-demand imbalances remained in the market despite adjustments of the rate through the auction system. “Arbitrage opportunities have resurfaced in the market due to the mismatch in the exchange rates in the cash and TT markets.
“Spot checks on some market players indicate that the market is able to clear import bills at this rate,” the central bank said in a statement signed by its governor, Wilson Banda.
A TT (telegraphic transfer) rate is a rate at which a bank converts foreign currency into local currency. Coincidentally, soon, the IMF’s Executive Board will be scrutinising Malawi’s Eligibility for ECF.
Now, what do I make of all these developments? Well, allow me to wait for some weeks to see if the central bank’s decision will produce the desired results. For now, let me delay my pain.
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