President Peter Mutharika has admitted that the local currency, the kwacha, was over-priced, observing that it is currently depreciating to its true value.
Speaking to the Voice of America (VoA) recently, Mutharika said the kwacha is further weakened by a weak export base.
The remarks come at a time when Malawi is experiencing a rough economic environment characterised by high inflation rate at 23 percent as of August 2015, according to National Statistical Office (NSO).
The economy is also suffocating from high interest rates in commercial banks hovering around 37 percent as well as a downgraded gross domestic product (GDP) growth rate of three percent this year from an earlier projection of 5.5 percent. Rising budget deficits are also crippling the economy.
The President’s sentiments also come a few days after the International Monetary Fund (IMF) declared that Malawi’s economic programme it supports—the Extended Credit Facility (ECF)—was off-track largely due to high borrowing both internally and externally as well as overspending.
But Mutharika told VoA that his government is working on modalities to bring the economy back on track.
“Part of the problem is a weak export base and the other currencies are strong, and in a way I think the kwacha over appreciated anyway, so it is probably depreciating to its normal level.
“But in the long term, I would like us to increase our exports and cut back on spending, and I hope that we would be able to get back to where we should be,” said Mutharika in the VoA report.
Due to the looting of public funds, donors withdrew their budgetary support which accounts for 40 percent of Malawi’s budget towards the end of 2013, a move that has further weakened the economy.
And in a cost cutting move, Mutharika said he has restricted local and international travel for all government officials, a move he said will save government about $20 million.
President Mutharika also dismissed a report by the African Review, a publication based in Kenya, which named him among the top 10 African presidents with high salary compared to the gross domestic product (GDP) of their countries.
“My salary is 1.5 million kwacha [per month] and is even less than most of the civil servants. It is certainly less than the governor of the central bank and the CEO of the Malawi Revenue Authority. It is not that much, I think … it comes to about $3 000 [per month] at the current exchange rate,” said Mutharika.
Mutharika also expressed optimism in the VoA report that the Public Service Reforms which government is implementing will help weed out corruption by ensuring accountability and preventing financial malfeasance in the country.