Goodall, Chuka to meet over kwacha

Finance of Minister Goodall Gondwe has said on Friday he would be meeting Reserve Bank of Malawi (RBM) Governor Charles Chuka over the exchange rate movement.

Gondwe disclosed this in an exclusive interview in Lilongwe last Friday at Capital Hill when asked to provide his opinion on the recent continued appreciation of the kwacha-notably against the dollar-which is hurting exporters.

“I will be discussing with the governor [of RBM] on what is the best interest of the country in terms of the exchange rate direction,” said the former IMF official.

His remarks comes barely three days after the International Monetary Fund (IMF) Resident Representative for Malawi Geoffrey Oestreicher advised the newly-elected government to maintain the flexible exchange regime and also the automatic price mechanism for fuel which were pursued by the former president Joyce Banda administration.

It still remains to be known whether the new government will abandon such a flexible exchange rate regime to opt for a fixed regime.

Business News understands that choice of an exchange rate regime is the domain of a government and not RBM but the central bank just recommends the chosen regime.

Beginning the month of December, the local unit has been appreciating marginally from K435.60, K434.67 (January 2014), K422.16 (February), K410.20 (March), K399.19 (April) and to K398.03 in May 2014.

However, while importers are smiling over the strength of the local currency as they find the cost of importing their goods relatively more affordable than was the case when the kwacha was massively depreciating, exporters on one hand are losing out over the same as they earn relatively less from a strong currency.

Gondwe also noted that the appreciation of the kwacha is happening at a time when the country is exporting agricultural products to the international market.

He added: “In a long-term view, we have to reach a level where it [the kwacha] reflects economic fundamentals on the ground. But now I think it’s seasonal. But the swings could be managed and I will be sitting down with the Governor over that.”

Speaking separately in an interview yesterday, RBM spokesperson Mbane Ngwira said the central bank would only ensure that the exchange rate movement is in line with government development agenda and that it is also sustainable to the business community.

“We want an exchange rate which is stable, the one the private sector can use to project their operations because if it fluctuates then business planning is affected,” said Ngwira.

He said in the recent times, the kwacha has been appreciating but at a slow pace due to RBM interventions coupled with low outstanding demand for foreign exchange in commercial banks.