Press Corporation Limited (PCL) group chief executive officer Professor Matthews Chikaonda has said Malawi needs an exchange rate system that is competitive enough to grow the economy.
Chikaonda was speaking during a public debate on the Economic Recovery Plan (ERP) in Lilongwe organised by the Economics Association of Malawi (Ecama) on Friday evening where he provided his input on the country’s exchange rate regime adopted by the Joyce Banda administration in May last year.
“The exchange rate that we need is the one that is competitive and that will make Malawi move and grow,” said Chikaonda, a former minister of Finance as well as Economic Planning and Development and ex-Reserve Bank of Malawi (RBM) governor.
Chikaonda was apparently reacting to comments by some participants who pleaded with government to revert to the fixed exchange rate regime which was widely employed by former president Bingu wa Mutharika’s administration.
One contributor who only identified himself as Mr. Mkaka, asked government to adopt a “moderated” exchange rate regime which he said is a “hybrid” between fixed and floated exchange rate regimes.
Government devalued the local currency by 49 percent in May last year and adopted a floated exchange rate regime, apparently succumbing to pressure from the International Monetary Fund (IMF) which earlier had asked the Mutharika administration to “clear distortions” in the exchange rate system.
Since the adoption of the floating exchange rate regime, there has been a general outcry by several quarters, championed by the Consumers Association of Malawi (Cama).
Recently, Minister of Finance Ken Lipenga faulted the fixed exchange rate system, arguing it punishes farmers who produce 80 percent of agricultural output and more than 60 percent of exports by denying them the benefits that can be accrued if the rate were determined by the market.