Local economists say the call by Macroeconomic and Financial Management Institute of Eastern and Southern Africa (Mefmi), a cooperative venture among 10 Southern African countries, including Malawi, to use Chinese yuan as a reserve currency for the region is ideal.
University of Malawi’s Chancellor College economics professor Ben Kaluwa said making yuan a reserve currency is the way to go.
“China has become Africa’s major business partner; hence, encouraging the use of the Chinese yuan as a reserve currency is just ideal.
“China has become a major source of foreign direct investment for Malawi and other African countries,” he said.
Economics lecturer at Catholic University Gilbert Kachamba also welcomed the idea, saying: “The fact that China has over the years been a major trading partner to Malawi and other African countries cannot be overlooked,” he said. In a statement, Mefmi spokesperson Gladys Siwela-Jadagu said most countries in the region have loans or grants from China and it would only make economic sense to repay in yuan.
The United States dollar is currently the world’s reserve currency, which is held in significant quantities by government and institutions as part of their foreign exchange reserves.
Said Siwela-Jagadu: “Foreign currency denominated public debt continues to increase as well as interest payments as most countries move to more commercial sources of borrowing to meet their increasing appetite for infrastructure projects.”