Africa-Press – Malawi. President Lazarus Chakwera could not have resisted appointing Dr. Wilson Banda as Governor of the Reserve Bank Malawi (RBM) considering the latter’s tempting academic credentials coupled with immense professional background. So too was the Public Appointments Committee (PAC) of Parliament, which approved Banda’s appointment without much ado.
Despite the fact that Banda assumed the Central Banks governorship at the time Malawi was grappling with the COVID-19 pandemic, tropical cyclones, and the war in Ukraine is blamed for the drop in export earnings and an increase in import bills owing to disruptions in the supply chain and rising commodity prices, his overall performance has been highly wanting.
While Banda is at the helm of RBM, Malawi is grappling with shrinking foreign currency reserves, its national currency, the Kwacha, has been hugely devalued and inflation is skyrocketing.
In a bid to shore up declining foreign exchange reserves and arrest inflation, the Malawi government through RBM devalued the Kwacha by 25 percent. As expected, the International Monetary Fund (IMF) hailed Malawi for taking such a step to normalize the forex market, a move that was aimed at improving foreign exchange availability.
According to IMF, urgent action was needed to reverse the trend of declining official reserves, which have reached their lowest level in recent years.
Gross reserves decreased to less than half, from US$847 million in December 2019 to US$385 million in March 2022, or around just 1.5 months of import cover. This is much lower than the recommended adequacy level (3.9 months of import coverage) for a credit-constrained economy.
According to RBM, the county’s official gross foreign exchange reserves in the first quarter of this year 2022 stood at US$374.48 million, a drop from US$429.17 million in the fourth quarter of 2021.
Sadly, despite the 25% devaluation pressure continues to mount on the Kwacha. This simply indicates that the 25% devaluation has failed to attract the much-needed dollars on the market.
Witnessing that the 25% devaluation hasn’t achieved its intended purpose, some irresponsible people propagated false information claiming that another devaluation is in the offing. The Ministry of Finance dismissed such claims as untrue and coming from people who don’t wish the country well.
Information from National Statistical Office indicates that the National month-to-month Inflation rate for June 2022 stood at 3.6 percent. The food inflation rate is at 3.7 percent while the Non-Food Inflation rate is at 3.3 percent.
The urban month-to-month inflation rate is at 4.3 percent. Urban Food and Non-Food inflation rates stand at 3.7 and 4.8 percent respectively. The rural month-to-month inflation rate is at 3.1 percent. Rural Food and Non-food inflation rates stand at 3.8 and 2.3 percent respectively.
The headline inflation rate (year on year) for June 2022 stands at 23.5 percent. Food and Non-Food Inflation rates are at 31.2 and 16.6 percent respectively. Comparatively, the Country’s headline inflation rate (year-on -year) for the month of July has jumped to 24.6 percent from 23.5 percent in June. Within the same period, the food and non-food Inflation rates are at 32.5 and 17.5 percent, respectively.
The National month-to-month inflation rate stands at 0.9 percent. The food inflation rate is at 0.7 percent while the non-food inflation rate is at 1.1. percent. As expected, the 25 percent devaluation of the Kwacha has triggered a corresponding rise in commodity prices. We have witnessed a hike in fuel prices and other commodities.
The RBM Governor may not be entirely to blame for the above highlighted fiscal challenges a lot is expected from his office if we are to reverse the current economic downturn.
Some quarters have even argued that old age might have also taken its toll on the RBM governor. Dr. Wilson might be an outlier in the adage that ‘wisdom comes with age.’
His economic productivity might be diminishing. That’s the right time to call it quits through resignation, in the absence of which, the appointing authority can as well come up with a better replacement. It’s time for new blood at the helm of RBM, Dr. Wilson might have tried but his efforts have not yielded the desired results.
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