The Economics Association of Malawi (Ecama) has asked President Joyce Banda’s government to maintain the floatation of the kwacha and other monetary policies put in place if the current budget and the economic recovery are to be meaningful.
A number of people have criticised the floatation of the kwacha and automatic pricing mechanism (APM) put in place by Banda’s administration, arguing they hurt businesses and also exploit poor Malawians.
However, speaking during Ecama’s Post-Budget meeting held at Mzuzu University on Friday night, Ecama vice-president Peter N’goma said government has to maintain the floatation of the kwacha, automatic price mechanism and other monetary policies put in place if it is to make strides in the economic recovery.
He said floatation of the kwacha ensures availability of foreign exchange (forex) for imports, narrows the margin between the formal and the informal market and helps check luxurious imports.
He added that the unpopular APM helps remove expensive subsidies on imports through APM which is good for any economy that wants to progress.
“As way back as 1980, research showed that floating exchange rate had not proved a major obstacle to development of trade [Beardshaw, et al., 1999],” he said.
He also called on the Reserve Bank of Malawi (RBM) to remain firm to counter any uncertainty and speculative tendencies in the economy.“There is also need to stay the course on low inflation target from 35 percent in May to 14 percent by December 2013, mop excess liquidity to reduce inflation rate and sustain the decreasing trend,” he said.
