(NYASATIMES) Bingu lashes at IMF, declares Kwacha will not devalue

COMMENT - African leaders need to form a united front against the idiocies of Neoliberal Economic Theory (privatisation, deregulation and free markets for corporate capital). This 'currency devaluation' to 'increase exports' is a scam which will cost the Malawian people because of a Kwacha price increase in the price of imported goods like fuel, capital goods, etc. Now if Malawi had a malawian owned manufacturing base, they could go the route of China. The President is absolutely correct in rejecting this policy prescription.

Bingu lashes at IMF, declares Kwacha will not devalue
By Nyasa Times
Published: September 22, 2009

Malawi President Bingu wa Mutharika has stood his ground that he will not devalue the currency, the Kwacha as argued by economicsts and has challenged International Monetary Fund (IMF)to tell what benefits will it be to Malawi if the currently is devalued.

Economists have been arguing that strong kwacha has been hurting the economy by making Malawi exports more expensive for foreign customers and also creating shortage of forex.

But Wa Mutharika in video interview post on: said the assertions are misplaced.

“The shortage of foreign exchange is not because that the Kwacha is not devalued. Infact, people are saying overvalue it and I am asking economists to tell me what is the correct value, because above that is overvalue, below that is devalue, what is correct. They don’t say,” said Wa Mutharika.

Wa Mutharika, an economist who worked for the World Bank, said he could not buy the theories to devalue Kwacha.

“These are things we put in economic textbooks. They are saying if we devalue the Kwacha then we will make our exports competitive. Which exports? Tobacco is never affected by the kwacha. You can devalue anything, it will not be affected. Tea is not affected. There are fixed markets. Cotton is not affected, so you devalue the kwacha, who benefits?” said the Malawi leader.

He said devaluing the currency will invite national economic depression.

“The day you devalue the kwacha, the price of oil, everything will go up for the ordinary person. Even tomatoes the price will go up, even onions will go up. So the inflation goes up,” said Wa Mutharika.

The economist-President of Malawi said IMF are contradicting themselves on economic orthodoxies.

“Am saying that the IMF has a contradiction in their mind, they don’t know what they are talking about. They talk about macroeconomic stability. What is stability? Stability is a level. The moment you take one of the parameters and devalue that stability is disturbed. Because then inflation comes in. And they saying they are following macroeconomics. I don’t know what kind of economic are the IMF,” said Wa Mutharika.

“And I am ready to meet them. I want one person to tell me one good reason or one advantage that are good to Malawi for devaluation. Perhaps ten years from now, if we have range of products that we are manufacturing that are going on the international market, perhaps the case of devaluation will make sense,” pointed out Wa Mutharika.

“But at the same time, have you ever heard the Americans, the British, the Germans, the French, the Chinese [and] the Japanese- devaluing? When did you hear them devaluing their currencies? But they are asking us to devalue, they themselves do not devalue,” Malawi leader said.

“So,” the President concluded “I am just keeping my ground and really until someone convinces me, Kwacha will not devalue.”

Malawi Kwacha has been trading at MK140 against the US dollar in recent days.

This is not the first time Wa Mutharika has defied IMF. In 2005, the President resisted that IMF restrictions on subsidising agriculture and introducing ‘Farm Input Subsidy programme’ that has transformed the country, that was once reliant on international food aid to feed half of its population, into a maize exporter.