In Malawi, pressure is mounting from economists whoare pushing the government to devalue the currency, the kwacha. Some say it'san appropriate response to the devaluation of major currencies such as the USdollar and the British Pound sterling.  ButPresident Mutharika refuses.

Malawi currency (kwacha)

Thekwacha recently traded at MK140 against the US dollar. It's been steady at thatrate for the past three years, and local economists say that's bad forthe economy. They say continuing topeg the kwacha to a major currency, especially the dollar, is a recipe for disaster.They say it has created a booming parallel, or black market, where there's abetter exchange rate– up to 50 kwacha more per dollar. Someanalysts say the black market rate is the true value of the kwacha and thatde-linking it from the dollar will help reduce Malawi'schronic shortage of foreign reserves. Since last year the countryhas been hit by foreign exchange shortages.

Thepresident of the Economics Association of Malawi, Thomas Munthali, says thestrong kwacha has been hurting the economy by making Malawi exports more expensive forforeign customers.

Munthalisaid the kwacha should be devalued by about 25 kwacha to about K167to thedollar. The advice was part of his presentation at a recent workshop on thebudget in the capital, Lilongwe. He said currently the exchange rate isovervalued by about 19 percent.

TheWorld Bank agrees and is calling on the government to devalue the kwacha.

TimGilbo is the Malawi World Bank country representative. A local daily newspaper recently quoted himas supporting the call for devaluation. Hesaid it could shield the country from major global shocks, especially during thecurrent global financial meltdown.

Gilbosaid in many countries, the public tends to perceive weak currencies as bad. Buthe said a weak Kwacha would actually improve Malawi's competitiveness on theglobal market. Asan example, Gilbo cited his native Australia, which he said devaluedits currency in 1997 by almost 50 percent. He said the move has helped the countrywithstand the current financial crisis by making its exports cheaper. 

Malawi president Bingu Wa MutharikaBut Malawi president Bingu waMutharika says devaluation would help those few who are hoarding US dollars. "Thedevaluation of Kwacha will only benefit a few individuals," particularlynon-Africans, he says. "They want topush , because they go to the market and convert the kwacha to USdollars and keep it. Suppose we devalue, they will quickly off-load theirdollars, make huge sums of money (out of that). These are the ones to benefit."

SoPresident Mutharika said he will not support the move. "Ihave resisted devaluation and will continue to resist devaluation, because Ineed to give the business community and everybody in Malawi a stable foreignexchange regime. And I am an economist. I understand and follow what ishappening around the world. I am not going to devalue the kwacha to please oneor two people," he says.

Butthe Malawi Confederation of Chambers of Commerce and Industry, which supportsdevaluation, is calling on the government to make more dollars available to thecommercial banking system. Economists say this can be done in part by crackingdown on the black market and unlicensed foreign exchange bureaus.

Executivedirector of the confederation, Chancellor Kaferapanjira, said that should helpthe government maintain the value of the kwacha. 

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