EU Ambassador says devaluation helps to regulate economy

EU Ambassador to Malawi Rune Skinnebach

The European Union Ambassador to Malawi Rune Skinnebach has offered a better explanation of why the government made the right call to devalue the Kwacha.

While he noted that devaluation gives room to inflation, Skinnedbach said the positives of devaluation outweigh the negatives.

Speaking to journalists on Saturday in Lilongwe, the EU ambassador said the misalignment of the currency inspires all kinds of fraud and it undermines the possibility of regulating the economy.

He said devaluation will not only help the government regulate the economy, it will also help contain misalignment inspired fraud in the country like the informal trading of the forex on the black market.

He said: “Prior to devaluation there was a misalignment between formal and informal exchange rate. The misalignment inspires all kinds of frauds and undermines the possibilities of regulating the economy.”

Devaluation of Kwacha has opened a whole host of opportunities in the economy. Following the Reserve Bank’s decision to devalue the Kwacha by 44% the IMF board approved Malawi’s Exchanged Credit Facility which opened the floodgates of goodwill.

As of now, the World Bank, United Nations, the African Development Bank and the European Union have all come up with different financial packages and there is a likelihood of resumption of the direct budgetary support by a number of multilateral institutions which was withheld due to economic mismanagement during the past administrations.