{"id":10622,"date":"2012-05-19T13:38:23","date_gmt":"2012-05-19T13:38:23","guid":{"rendered":"http:\/\/www.faceofmalawi.com\/?p=10622"},"modified":"2012-05-19T13:38:23","modified_gmt":"2012-05-19T13:38:23","slug":"malawi-bumpy-road-to-economic-recovery","status":"publish","type":"post","link":"https:\/\/new.faceofmalawi.com\/index.php\/2012\/05\/19\/malawi-bumpy-road-to-economic-recovery\/","title":{"rendered":"MALAWI: Bumpy road to economic recovery"},"content":{"rendered":"

A sizable devaluation of Malawi\u2019s currency, aimed at reinvigorating the economy and wooing back international donors, has triggered steep increases in the price of basic goods and pushed many Malawians deeper into poverty.
\n\"\"<\/a>
\nFormer president Bingu wa Mutharika, who died suddenly in April 2012, had resisted calls by the International Monetary Fund (IMF) to devalue the Malawian kwacha as a way to boost exports, arguing that it would cause too much suffering to the poor. The kwacha remained pegged to the US dollar at a rate of 166, creating a parallel informal market in which the dollar was sold at more than 300 kwacha, draining foreign currency from the formal banking system.<\/p>\n

Mutharika\u2019s refusal to meet the IMF\u2019s demands and concerns about his increasingly autocratic style of governance resulted in a significant loss of donor support that at one time had accounted for 40 percent of the country’s budget, and helped to push Malawi towards financial collapse.<\/p>\n

Malawi\u2019s new president, Joyce Banda, has moved quickly to restore relations with donors, in part by meeting the IMF\u2019s conditions for a support package. On 7 May, she devalued the kwacha by nearly 50 percent and untied the currency from the dollar.<\/p>\n

In a statement by the Reserve Bank of Malawi on the same day, Governor Charles Chuka said the move was intended not only to improve the availability of forex and unlock donor flows, but also to reduce demand for imported consumer goods in favour of domestically produced goods. He noted that since the prices of most commodities already reflected the parallel market exchange rate, devaluation was not expected to trigger further price increases.<\/p>\n

However, the prices of many basic items have gone up by as much as 50 percent and fuel prices have risen by 30 percent, pushing up the cost of public transport by about 40 percent.<\/p>\n

\u201cThe impression I had was that things will come out much better [after the devaluation], but prices for every commodity are going up now,\u201d said Rhoderick Limula, an informal trader from Blantyre, the country\u2019s commercial capital. Economic survival has become more uncertain than ever, he told IRIN, adding that with the new prices he could no longer keep his business going and would have to give it up.<\/p>\n

A necessary evil<\/p>\n

The Chief Executive of the Consumer Association of Malawi, John Kapito, pointed out that Malawi is a landlocked country and heavily dependent on imports, so any weakness in the kwacha was bound to have negative consequences for consumers, but that devaluation was a necessary evil.<\/p>\n

\u201cThis was an economic reform that Malawi could have introduced some time back, but we decided to hold out and dictate an exchange rate that did not reflect our economic performance,\u201d he said. \u201cI believe this decision was going to be made by anyone in government if we wished well for Malawi in the medium and long term.\u201d<\/p>\n

Kapito added that the government needed to rapidly implement mechanisms such as salary increases to cushion vulnerable Malawians from the short-term effects of devaluation.<\/p>\n

\u201cThe state needs also to take into consideration the many Malawians that are not working,\u201d he told IRIN. \u201cI believe that the state needs to come very quickly and address the many challenges that Malawians are facing because of this devaluation.\u201d<\/p>\n

Donors come back<\/p>\n

The government has yet to announce any such measures, but donors have r<\/p>\n","protected":false},"excerpt":{"rendered":"

A sizable devaluation of Malawi\u2019s currency, aimed at reinvigorating the economy and wooing back international donors, has triggered steep increases […]<\/p>\n","protected":false},"author":1,"featured_media":8641,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[207],"tags":[342,525,135,300,3,212,220,865,357,465,573,202,515,466,289,340,258,1072,311],"class_list":["post-10622","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-2","tag-agriculture-2","tag-bingu","tag-ngwazi-bingu-wa-mutharika","tag-bingu-wa-mutharika","tag-business","tag-children","tag-democracy","tag-demonstration","tag-development","tag-dpp","tag-economy","tag-education","tag-government","tag-joyce-banda","tag-lake-malawi","tag-lilongwe","tag-malawi","tag-politics","tag-poverty-2"],"_links":{"self":[{"href":"https:\/\/new.faceofmalawi.com\/index.php\/wp-json\/wp\/v2\/posts\/10622","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/new.faceofmalawi.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/new.faceofmalawi.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/new.faceofmalawi.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/new.faceofmalawi.com\/index.php\/wp-json\/wp\/v2\/comments?post=10622"}],"version-history":[{"count":0,"href":"https:\/\/new.faceofmalawi.com\/index.php\/wp-json\/wp\/v2\/posts\/10622\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/new.faceofmalawi.com\/index.php\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/new.faceofmalawi.com\/index.php\/wp-json\/wp\/v2\/media?parent=10622"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/new.faceofmalawi.com\/index.php\/wp-json\/wp\/v2\/categories?post=10622"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/new.faceofmalawi.com\/index.php\/wp-json\/wp\/v2\/tags?post=10622"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}