Malawi refuses to devalue currency

Blantyre - Malawi's President Bingu wa Mutharika said on Saturday he would not take International Monetary Fund (IMF) advice to devalue the local currency because he was protecting the poor.

"I have been arguing with the IMF to tell me how I am going to protect poor Malawians if prices for essential products go up if I devalue the Kwacha" he said on state radio.

"They are not telling me anything, all they say is that we will find a way," he added.

The president was speaking after the IMF said Tuesday its programme in Malawi had stalled over policy disagreements.

"Until (the) IMF tells me how to protect my poor people, I will not allow devaluation of the kwacha," said Mutharika, referring to the country's currency, which has been trading at K150 to a dollar for many years.

The president made his comments, speaking in the main local language Chichewa, in what he described as "a special address to the nation".

The IMF had also instructed the his administration not to allow the Reserve Bank of Malawi to control some $400m foreign exchange receipts from tobacco, its chief cash crop, he said.

They had said the foreign currency should be traded through commercial banks, he added.

"Forex is no longer in the commercial banks. It’s with businessmen and people who run hardware shops," he continued.

Both the business community and the IMF were "pressuring the government" to devalue to kwacha to K180 to a dollar, he said.

"If we do that, prices of essential products and services will go up including transport. Who will win?" asked Mutharika.

Businesses had been among those to who had snatched most of the foreign currency from commercial banks and were hoarding it "hoping to make more money the minute we devalue the Kwacha."

The IMF said Tuesday the government had failed to conduct the second review of the $79.4m extended credit facility approved last year to cushion foreign exchange shortages.