Devaluation Finally?

Malawi Economic Justice Network does not seem to know what happens to the ordinary person that uses public transport. Though it is this person they should have considered first other than the donors wishes who don't even live in Malawi.

Shall companies operating in Malawi make profit with such a huge percentage of devaluation? In my opinion, those that sell their products locally and make international transactions to enable them to do so, if they do not cut their international transaction costs, they may decide to raise the costs of their local sales to cover up because they are buying the dollar 49% expensively.

In short, companies whose Forex earnings are lower than their Forex expenditure, will operate at a loss unless they cut their Forex expenditure. If they do not cut their expenditure but decide to raise the prices, they contribute to the high inflation.

In my opinion, these companies are not of benefit to Malawi but are its economic drain into wastage.

The government will need to make sure they separate their donations so that, they cover expense requirements that will require importation of goods and services.

If they use this Forex for local expenditure, it should be first after covering all the importation costs requirements, it should do this transactions with the reserve bank not the local ordinary banks otherwise, this Forex will get in the hands of individuals and companies and make an appearance of Forex shortage.

For all its development contracts, the government should make sure it is using Kwachas for for transactions not external currency.

This is necessarily what will help the Kwacha to regain its value because of its usefulness in local transactions.

For all its Forex transactions, banks should not hold the Forex in their own reserves but should exchange it with our local currency to the central bank at the official rate.

If the banks decide to still hold their Forex within them and not exchange it, the government will keep on failing to make imports of public goods and services like fuel, medicines, machinery, etc.

I would then also consider that banks should stop keeping money in foreign currency but convert the foreign currency at the official exchange rate.

The expectation of maintaining value of the amount at point of deposit should motivate the desire to stabilize the exchange rate. So then, those who put foreign money in banks will not have to worry about their foreign money losing value but get it bank as they put it in.

This will also help our currency regain its value for its usefulness.

Other, things the government can consider and prioritize with the gained Forex is to buy machinery and vehicles to rebuild back PVHO.

It is most often difficult and expensive to maintain the condition of public infrastructure if the government does not have the required machinery. Furthermore, it is cheaper for consulting companies working on building or construction of public infrastructure to hire the equipment from PVHO, than to individually acquire some.

The amount paid to hire this equipment should be enough to cover costs of maintainance, to cover the salaries of the employees, to allow for acquisition of new equipment and also to contribute some to the central treasury.

The idea of a self-sustaining government should not be bad if we understand that government has employees, the civil servants who have to be paid at the end of the month. They have administrative costs which have to be covered on daily basis in order for it to accomplish the duties it has. For without these, a nation is ungoverned. It is then useless to have a government in place if it cannot settle disputes among its citizens, if it cannot protect its citizens, if it cannot feed, educate, cloth and provide good health to its citizens.

After all, these are the same things that donors wish to achieve at the end of the day. Yet, what then motivates their wish to govern us? For look, they do end up leaving us without our necessities when then they desire to.

It is better then to let our elect government govern us than have donors govern us leaving us hungry when they want to.

Only malawians can better take care of malawians. A European will someday remember his Europeaness and cease to care about Malawi. They will destroy our land at wish. But look, we malawians have no where else to go in the world but right here in Malawi. Allow us therefore to take care of our own home as we wish to. Allow us to protect our own home from those that destroy it. Allow us from our own homeland grow our own food. For if we do not grow our own food, no other land will grow food for us. For land should feed those who dwell on it. And each of those that dwell in that land will always have enough. But if some land is left uncultivated, then the world will have a food deficit.

Let priority for land ownership be to the natives. If possible a foreigner should only have temporary use of land and also of limited size maybe just enough to sustain him and his family in their time of stay in that land as a global citizen. Then we might never again have conflict like of Zimbabwe.

Let the owners of the land retain their right to regain it when they need for their own use.

For if there is such a right granted to the natives, the foreigners dwell with this expectation and when the owners require it back, a good amicable settlement is possible without inviting sanctions like Zimbabwe because the foreigners have to forcefully give up the land.

It is not good to get citizenship fraudulently for you necessarily infringe on the natives right to their land. If you do, get kicked out, forcefully, take it humbly.

This reminds me on the citizens of Burundi recently vandalised. Why hurting another human being is a crime, government should work on repatriating the Burundi people as there is now peace in their land. I believe international laws of repatriation of refugees should resolve every problem they may encounter as they get repatriated.

In the end, it is good when foreigners decide to settle down to start businesses, consider where they come from. After all, you require work permits or other permits to operate in America or Europe. It should not be different in Malawi for the same reasons.

Devaluation Reloaded

In a discussion with two economists on facebook yesterday, I established the following: 

In a liberalised economy, there is little regulation on forex reservation. The forex ends up in circulation among the citizens this leaves the governments unable to do any international transanction without the forex reserves. 

The decision that follows is to devalue the currency so that the population would find it attractive to sell their forex. But what this decision neglects is the fact that for businesses that depend on imports, the cost of their imported goods gets higher. As a result of this, the prices of things gets high. and the rest of other things also gets high. Now of these changes, those dependent on salaries, suffer a lot as the salaries are the least considered in all these changes, for a rise in salary also raises the labour cost also requiring a rise in the price of the products.

The cost of living gets high. After devaluing, the exchange rate is left as is. That means that every year the currency has to be devalued to recover the forex earnings.

This is devaluing is necessarily a fix to the problem arisen due to liberalization of forex management. But it creates many other problems in the the money flow ecosystem.

What devaluation does is economically depress a region that uses the devalued currency. In the end the region's benefits from exports gets smaller and smaller and the loss from the imports gets bigger and bigger since the currency can only be devalued with relative to other currencies for the the government to get required benefit from the devaluation which is in fact: getting back the forex from circulation into the forex reserves.

The benefit from devaluation is smaller than the loss from it. Hence there is need to find other ways of regulating forex with the benefits of liberal economy but also to allow regulation of some economic activities.

On devaluation

I asked hotel rates in blantyre. After devaluation, the rate in dollars currently exchanged at K167. Will increase by the devaluated percentage.

For instance, the room selling at $35 dollars, and K4000 will increase in cost on the malawian kwacha side, but will remain the same on the dollar side.

The rate at which our earnings are exchanged to foreign currency to buy imports like fuel, will require that we pay much more than we are currently paying, fuel cost, will have to go high.

And due to this increase the cost of everything else, will have to go high.

If all businesses including government increase the salaries of employees, the effect on the citizens might be negligible but if some employing organisations decide not to increase the salaries of the employees, these will suffer the worse effects of devaluation.

While, these so called, economists are speaking, the decision makes are two. The president and the reserve bank governor.

Let these act wise amidst all the noise. For they shall cause indeed a lot of suffering for malawians.

I must not speak this again. It's not worth troubling my mind over if it achieves nothing.

As for me, while I am using a provisional rate of $25 per hour, rounding it up to K3,500 I will necessarily do the same just change the K3,500 to the new devalued rate.

My earning is not limited by a companies decision.

I will have to increase my rate to $75/hour and so for malawian clients, it will be on the hire side. But if I increase my customer base, my earnings are greater than my employed colleagues.

It's high time I found a living for my own I believe.

Wish you the best.

Of Apologies and the Lack thereof.

Chewa Heritage Foundation seeks an apology from Henry Phoya for the remarks he made against the Chewa custom gule wa nkulu.

While seeking apology seems easy to demand, sometimes without proper basis, it is useless to apology without discussion of the real matter at hand.

I must speak, for a similar demand for an apology derailed much important work in the year 2011 including a whole generation of students missing their classes and have to be made to repeat their classes.

This wasted the government a lot of millions, I should say, of tax payers money, though in fact it is donor donated since Malawi has never fully funded its budget until the same year 2011. This wasted the parents, pocket money and transport apart from their tax. And is wasting even more money this year because more lectures have to be recruited (of course, I also applied, I had to deliver the letter by hand).

This money is hard earned and the government does not have the luxury of wasting money for it has no source of funds than donations and tax revenues. A mere useless apology should not cost this much.

So, Henry Phoya speaks his experience with mcp and his dislike of cultural ritual he was required to do.

It wasn't right for MCP to do that. If anything, MCP is necessarily the one to apologies, for using the cultural ritual in this way.

Whether the Chewa themselves find this ritual useful, they should always expect that someone who does not understand the culture will always look at it in this negative perspective. And might publicly express his dislike as Henry Phoya has. If they do so value it, then what good it has should be demystified for there might religious conflict in the practice which if the whole heritage of the Chewa hinges itself on this value which does introduce religious conflict among its own descence.

Most of these that are today cultural values have undergone refining according to various new problems the culture introduces. And there is no reason these cultural heritages should not refine to incorporate the challenges of this age. Including religious values.

For it might be found the cultural heritage is highly lacking than what the bible offers, and what the bible is not easy to translate to the masses in a single day, that is why it is difficult to resolve issues like marriage for a generation that has understood that sex before marriage is sin. And this with the expected high costs of having a wedding.

So, unless we fix the current bad in our cultures, unless, we make known the good values of our culture to generations that do not know these good values, a public expression of a bad cultural practice does not seem to require an apology in my opinion.

So, I have spoken. My speech costs me less than K80. How much will the apology or the lack of it cost?

The previous refusal to apologies is still costing Malawi government of millions if not billions of tax payers and donors money. To make record straight on those who keep claiming tax payers money. Malawi is still dependent on donors. Though it did once manage a self funded operational budget last financial year.

Wish you a good day.

Ps: I must say, Henry Phoya managed to apologies even before I made this post.