Malawi’s decision to devalue its currency will help the country in the long-term, despite potential short-term pain, said civil society leader Billy Mayaya.
This week President Joyce Banda cut the Malawi currency’s official rate by a third, and there were local reports of people buying out grocery stores in a panic that prices would rise.
Mayaya, a program manager for the Lilongwe-based advocacy group Church and Society, said those reports were overblown.
“The grocery stores have not really run out of items, but there is apprehension on the part of the communities in terms of what will happen if prices go up,” he said.
The monetary move is seen as one way to repair Malawi’s relationship with the International Monetary Fund, which had recommended the devaluation of the kwacha currency. Former President Bingo wa Mutharika, who died last month in office, had refused the IMF’s advice.
“I think, unfortunately, one of the necessary evils of the economy is that we have to devalue in line with the IMF and the World Bank prerequisites,” said Mayaya. “But I think the government should insist on getting the buffer support from these institutions, in order to cushion the people from those economic shocks.”
He added the devaluation decision might hurt Mrs. Banda’s popularity in rural areas, but he thought Malawians in urban communities understood the need to repair relations with international donors. Banda’s government could heal other concerns over governance that aid organizations had expressed, Mayaya said.
Last year, the U.S. Millennium Challenge Corporation suspended $350 million in aid to Malawi because of concerns about governance after 18 people where killed amid clashes between protestors.
Mayaya said during a recent conversation with MCC representatives, civil society leaders supported renewed talks about the aid contract in light of their country’s new leader. The monetary award is tied to agreements of good governance and the “pursuit of economic freedom.”
“We see that the current president is moving in the right direction to get that very much needed support,” he said.
President Banda is also trying to mend Malawi’s poor relations with its neighbor, Zambia. Bad blood between Mr. Mutharika’s government and that of Zambian President Michael Sata began with a 2007 political rift, before Mr. Sata became president. Since his election last year, Mr. Sata had been refusing to visit Malawi. Mrs. Banda now says diplomacy is back on course.
