LILONGWE (Malawi NewsNow) –The Malawi Confederation of Chambers of Commerce and Industry MCCCI has faulted government for orchestrating devaluation of the kwacha and ordering the hoarding of forex by commercial banks saying businesses are suffering with such policies.
Minister of Finance Mr Goodall Gondwe earlier confirmed that banks were directed to hoard the forex from tobacco to induce devaluation of the kwacha with the aim to ensure tobacco farmers get more money for their farm investments.
MCCCI Vice President Mr Arthur Chirwa said in a interview that the private sector has been affected by forex scarcity as traders are resorting to getting letters of credit when importing goods and services with the view to pay in forex later.
Chirwa said the greatly affect businesses as they will be forced to pay more at a later stage when the Kwacha would have weaken further a development that will lead to significant losses for businesses.
“Anybody who does imports will certainly have to pay more Kwacha so the question is where does he gets the excess Kwacha from, if goods were procured before depreciation and the product was not sold it means that the business is losing.
“There are a lot of companies and business that are importing where they will pay at a later date so with this devaluation there is going to be an exchange loss now that exchange loss impacts on the company’s profitability”, said Chirwa.
On assertions by finance authorities that devaluation will benefit the farmer, Mr Chirwa said tobacco farmers will get good return but the same farmer will buy fertiliser at an escalated cost because the farm inputs are not produced and purchased locally.
“The farm inputs therefore will be pegged to a dollar or a Rand so in any case I don’t see farmers winning and I don’t think that the government has helped neither the farmer, nor the importer”, he said.
Ministry of Finance spokesperson Mr Nations Msowoya refused to comment on the matter saying the central bank is responsible for the exchange rate policy.
“The right authority to speak on the matter is the Reserve Bank of Malawi officials who are tasked with monetary police and exchange rate policy suffice to say that it is market determined, forces of demand and supply so as authorities am sure the central bank is monitoring closely”, said Mr Msowoya.
He maintained that the situation is market determined “probably now the demand has gone up compared to previous times about forex availability on the market”, he said.
Central bank spokesperson Ms Mbane Ngwira explained that the devaluation has been induced by huge demand for forex and at the same time market speculation as Authorised Dealer Banks are hoarding forex in anticipation for better rates at a later stage.