BLANTYRE--The Reserve Bank of Malawi has down played criticisms from opponents of the current currency regime saying those against the floatation of the Kwacha are arguing in a vacuum.
In an interview with MaraPost, Deputy Reserve Bank of Malawi (RBM) Governor, Dr. Grant Kabango said the regime government had adopted was the best model given the current economic situation the country was going through.
Recently, there have been calls for the central bank to revert to the fixed regime rate but the Reserve Bank has stood to its ground, stating it is not ready to change its stance. According to the RBM Deputy Governor, the Central Bank is only learning through the media that other quarters are proposing the exchange regime change from floatation to fixed regime.
The floatation exchange regime relieves the central Bank from involvement in determining the rate at which the local currency is exchanged to foreign currencies there by leaving it floating freely. This has made the Kwacha to move freely in accordance to strengths of major currencies such as the US Dollar.
This has also precisely moved downwards from 250 kwacha to 292kwacha representing close to 17 percent depreciation and that is besides the initial 49 percent devaluation in April, forcing upward adjustment of prices of basic commodities including petroleum which had kept increasing on monthly basis.
According to economists, the trend is causing panic to government such that it is contemplating a revert to the abandoned Bingu wa Muthariaka’s policy which had fixed it to control the movement of prices.
Meanwhile, economist Friday Jumbe has proposed an introduction of management of the floatation. Whereas economist Mavuto Bamusi has recommended that government fixes the currency to correct the pricing trend.
But Kabango has expressed confidence with the current regime, asking people to be patient as they expect a significant change in short term. International Monetary Fund and local Banks have also spoken against the proposed change, claiming the kwacha must be left alone until it settles at its base.
©2012 The Maravi Post. Reproduction without acknowledgment prohibited.