…It will be good for the country and its economy
United States Ambassador to Malawi David Young has called on Malawi Government to devalue the Kwacha as one way of dealing with forex issues and fixing the economy.
Young made the remarks in the Times Exclusive program on Times Television.
Malawi has been facing forex shortage challenges for over a year and this has led to fuel scarcity problems and a rise in prices of goods and services.
Young during the interview noted that there are two exchange rates in Malawi with the official rate going around K1030 for one dollar and the unofficial rate at K1500 for one dollar.
“That disparity, people are making money off of that but it is outside the system so you are not getting tax revenue and it is not regulated.
“That’s a huge drain on the economy. Eventually, you are going to realign and bring those exchange rates together,” he said.
Young added that there is also need for government to have hard currency in the system to cushion the re-alignment of the exchange rate.
He further noted that Malawi’s exports are currently half of what they used to be 10 years ago because tobacco usage has gone down, mining revenue has also been reduced and the exports for the new crops that are being cultivated such as macadamia are growing slowly.
He argued that Malawi needs an economic policy that supports the growth of the new sectors of the economy.
“We need to revive mining, boost tourism and make it able for the exporters to export more groundnuts, soy and Macadamia,” said Young.
He further said that this will generate more foreign exchange when the transactions happen through the formal economy because currently Malawi is said to be losing US$700 million through smuggling of goods.
According to Young, realigning the Kwacha is part of a bigger solution that should involve border security to deal with smuggling and introduction od regulations that promote trade and investments.
Asked if America is contributing to the worsening economic situation in Malawi since it suspended direct budgetary support, Young said the United States is not to be.
He said his country pumps millions of dollars into Malawi including K350 billion every that helps provide life-saving anti-retrovirals (ARVs) to over 900,000 Malawians.
He expressed doubt if the United States will resume budgetary, saying the cashgate scandal, where politicians, businesspersons and civil servants connived to steal billion in public funds, left a legacy.
“We still have challenges that if money goes directly to the government we have to be concerned about how it is going to be used. We need to verify according to our laws that every dollar we send is used well. So what we do throughout the world is that we work with partners to make sure we can verify the results,” said Young.
He, however, said Malawi has made good progress and he expressed hope that the country will secure a program with the International Monetary Fund in the next four months get funding from the World Bank funding which will help lift the economy.
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