IMF, analysts wary of dollar strength
Economic analysts have called for economic diversification to cushion Malawians amid concerns that the appreciation of the dollar against the kwacha could trigger sustained inflation.
The analysts were reacting to an International Monetary Fund (IMF) analytical note, which cautioned that the appreciation of the greenback against the major currencies in sub-Saharan Africa could lead to “higher inflation, larger debt and a weaker trade balance in the near term”.
Reads the note in part: “For the region as a whole, a one percentage point increase in the rate of depreciation against the US dollar leads, on average, to an increase in inflation of 0.22 percentage points within the first year.”
Since January last year, the kwacha has depreciated against the dollar, dropping 20.41 percentage points from K823.30/$1 to K1035.05/$1 in April this year. In May last year, the kwacha was devalued by 25 percent.
Meanwhile, inflation is hovering at around 27 percent, according to National Statistical Office.
Malawi University of Business and Applied Sciences associate professor of economics professor Betchani Tchereni cautioned that inflationary pressures arising from the depreciation of the local currency against the dollar will persist if local monetary authorities do not address the root causes of inflation in Malawi.
“We are killing our economy by relying on imports. We need to address that,” he said.
On his part, Bridgepath Capital Limited chief executive officer Emmanuel Chokani urged authorities to focus on boosting exports by diversifying the economy. “This could be achieved through incentives or subsidies for industries with high export potential,” he said.
