President Dr. Lazarus Chakwera-led government is desperate for forex so they are trying to use every opportunity to achieve that and they don’t care about its effects.
They made a decision to devalue the Kwacha again but because they know what happens when they explicitly do that, they are trying to be clever, taking advantage of the fact that Malawi is generally an illiterate nation.
- They have raised policy rate. In other words, they have increased the price for loans/lending rate.
- The policy rate will/has raised interest rate for Commercial Banks.
- This has raised the Cost of living for Malawians, meaning Malawians have to endure more Kwachas to afford basic necessities.
- The change in policy rate will raise both interest rate and exchange rate. This means more Kwachas will be needed to satisfy one US dollars.
The end that is achieved in the above is the same end that is achieved when the means was devaluation. In other words, government is achieving devaluation results by using a different method that seems less evil and the goal is that Malawians should not notice.
After raising the policy rate, the RBM says they will increase it further.
In summary, government has decided that the only method to make forex available is to make Kwacha weak to US dollar so that less dollars can be coming to buy more of our resources; our resources are made cheaper to the US dollar as a way of attracting the dollar.
This is what happens when a weak government has failed to stir development in the production sector.
Government has chosen to sacrifice Malawians by raising the cost of living in order to get the dollar.
