The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) has advised President Peter Mutharika’s administration to stick to a floated exchange rate regime implemented by his predecessor Joyce Banda in May 2012.
MCCCI chief executive officer Chancellor Kaferapanjira, speaking in his presentation during a one-day symposium on monetary and exchange rate policy at Sunbird Nkopola Lodge in Mangochi on Friday, said maintaining a floating exchange rate regime could avoid further occurrences of once-off devaluation which, he said, is detrimental to the economy.
Said Kaferapanjira: “There is need to stick to a floating exchange rate regime to avoid a once off devaluation which as witnessed before, can cause havoc to both the consumer and business.”
Minister of Finance, Economic Planning and Development Goodall Gondwe has since hinted that the President does not have any problem with a floated exchange regime, adding that it is the wish of government to have an exchange rate that is in the best interest of the business community and all Malawians.
In recent years, Malawi’s exchange rate regime has undergone cycles of both fixing and floating.
The country adopted a floating exchange rate system between 1994 and 2007, but virtually fixed the local currency between 2008 and 2012 before floating it again in May 2012.
Under the fixed regime, government fixes the official exchange rate with little movement over time while a flexible or floating exchange rate regime is determined by a free interplay of market forces or demand and supply in the foreign exchange market.
He said on a positive note, the reforms have aided Malawi economy to accumulate enough foreign reserves as manifested by improved months of imports cover.
Kaferepanjira said on a negative note, the reforms have also induced inflationary pressures in the economy.
In mid-June, the International Monetary Fund (IMF)urged the new administration to maintain some unpopular reforms started by Joyce Banda in May 2012, such as the flexible exchange rate and the automatic fuel price mechanism (APM), saying the measures “have served Malawi well and we hope that both are maintained.”
Earlier in May, ahead of the May 20 Tripartite Elections, the Economics Association of Malawi (Ecama) also pushed the need for the elected government to ensure weighing economic reform package by the People’s Party (PP) administration and maintain those that yielded positive results in the economy.