Malawi Confederation of Chambers of Commerce and Industry (MCCCI) has blamed the recent sharp fall of the local currency on panic, saying foreign exchange is available to private sector players.
MCCCI chief executive officer Chancellor Kaferapanjira, in an email interview, urged government to “talk and not mute” on important issues to create confidence on the market.
“The panic in the exchange rate market has been principally a result of expectations that foreign exchange is going to disappear soon as the donors are unlikely to release direct budget support to government,” he explained.
The kwacha has lost over 25 percent of its value since early September this year, to trade at around K520, a situation some economic analysts attribute to a clear imbalance between what the country generates in form of foreign exchange and the foreign exchange it uses for imports.
The loss in the value of the currency has since sent shivers to most economic agents, especially ordinary consumers and importers as they find the cost of basic goods and imported raw materials expensive, respectively.
However, over the past few weeks, the kwacha seems to have stabilised.
“Our members in the financial sector inform us that the taps are not dry and that if it were not for the panicking, the kwacha would easily have held firm,” said Kaferapanjira.
He said the donors—who continue to withhold budget support—say they have not stopped bringing in foreign exchange except that it is going straight to funding projects through commercial banks and not through Treasury.
Kaferapanjira, however, urged government to ensure effective communication on important issues to economic operators.
He said doing so would create confidence and trust between government and its people.
Commenting on the recent bank rate hike by 2.5 percentage points to 25 percent, Kaferapanjira said such a raise in the policy rate by the Reserve Bank of Malawi (RBM) has led to commercial banks hiking lending rates adding that it has dealt businesses a double blow.
He said imported inputs and other products have become more expensive due to the depreciation of the kwacha, while the increased cost of borrowing has added a further pain.
According to Kaferapanjira, following such adjustments in the value of the kwacha and the cost of borrowing, prices of commodities have already shot through the roof, making living extremely tough for ordinary Malawians.
“It should not surprise us that inflation, which is a measure of the general rise in prices of commodities and services, goes up. We have already seen price rises anyway,” he said.