Chikaonda warns against kwacha craze
Former Reserve Bank of Malawi (RBM) governor and ex-finance minister professor Matthews Chikaonda cautioned on ‘joy’ over the recent appreciation of the kwacha to the dollar by some quarters in the country.
The Press Corporation Limited (PCL) group chief executive officer has said the dramatic U-turn in the value of the local unit to other international currencies could be short term and could be as a result of several variables since Malawi is an open market economy.
“It [the appreciation of the kwacha] is something which we have to be careful about. Malawi is an open market economy and the kwacha can appreciate because of the nature of the market dynamics such as the movement of the dollar,” said Chikaonda on Friday.
He was speaking in an interview with Nation Online at parliament building in Lilongwe soon after Malawi President Joyce Banda had finished reading out the State of the Nation Address marking the opening of the budget session.
Chikaonda was specifically reacting to a query on the recent dramatic movement of the kwacha, which has in recent times appreciated significantly to trade to around K350 to a dollar from a peak of around K420 in the past few months.
The appreciation of the kwacha has since sparked joy among authorities who have attributed the sharp U-turn in the movement of the currency to inflow of tobacco foreign exchange and tight monetary policy stance by RBM.
Chikaonda said the kwacha could be appreciating on account of the movement in the value of the dollar and not necessarily because of other factors cited by authorities.
He said what is of paramount importance is a well-managed currency which he said should enable businesses to plan properly.
“But the signs are pointing to the right direction as inflation is going down and money supply is also easing. What is key, however, is fiscal discipline,” added Chikaonda.
In her address, the President said her administration will continue to pursue “with vigour” to bring down inflation and achieve a continued appreciation of the local currency to sustainable level.
She said she was aware of the many pressure points but said it will be very critical that government remains on target “if we are to consolidate and sustain the progress achieved so far.”
