Govt urged to focuson structural problems

Economic analysts have urged the government to focus on the “structural problems” that led to the devaluation of the kwacha to avoid regressing to a similar situation in the future.

They said this in  reaction to the 44 percent kwacha devaluation effected on November 9.

In an interview on Tuesday, Mzuzu University agriculture economist Christopher Mbukwa urged the government to find solutions to boost exports and generate enough foreign exchange to meet the country’s growing appetite for imports.

He said: “Increased negative trade balance and lower foreign exchange inflows coupled with increased imports values are likely to maintain downward pressure on the value of the kwacha as foreign reserves continue to decline, resulting in further depreciation of the kwacha.”

Mbukwa further said the failure to close the trade imbalance is the reason the 25 percent devaluation implemented in May last year did not work.

Economic analyst Bond Mtembezeka said authorities need to be serious about “generating forex sustainably” to support the economy and ably support import substitution.

He said: “Without these, there is absolutely no tangible solution and we will keep devaluing the kwacha.

“We might need to explore radical solutions such as promoting exports of cannabis and going full-throttle in mining.”

Malawi Investment and Trade Centre chief executive officer Paul Kwengwere in an interview urged authorities to focus on improving the current and capital accounts by increasing national exports while simultaneously reducing imports.

He said: “This would take many forms, including effective exchange rate management to ensure our currency is not overvalued in which case imports would be cheaper relative to our exports.

“But most importantly, there is a need to pour more resources into trade promotion and facilitation which can catalyse identification and penetration of new export markets for our export products.”

In its September 2023 Monthly Economic Report, Nico Asset Managers Limited said that the kwacha will remain overvalued in the short-term owing to foreign currency shortages as a result of declining foreign currency reserves and limited letters of credit from international banks.

The firm said the situation will likely to ease in the short and medium- term.