Reserve Bank of Malawi says economic instability has for some time facilitating the trend of devaluation of the Malawi kwacha.


Addressing the press on Friday in Lilongwe, RBM governor, Dr Wilson Banda gave an example of the recent 44% devaluation of Malawian kwacha as a result of instability of currency at the Market.


Banda cited that black market has also contributed to the depreciation of the kwacha one as it cannot be controlled.


“The problem with these things is that you should take a position where you say you are not going to touch the exchange rate because you want to protect the vulnerable group. The position that eventually comes up is that the market does it for you. And this is when you see a black market developing and that becomes uncontrollable,” Banda said.


The RBM governor challenged employees not to force an adjustment of salaries from their employers as this may fuel escalation of prices.


He is of the view that higher wedges might force the producers to charge more on their goods in order to balance what they have invested.


“A wedge inflation spiral arise at a situation where workers demand higher wedges, and those higher wedges increase because of production. In order to recover the amounts that have been spent, prices have to be adjusted. That is what causes the Inflation,” he added.


Dr Banda among others has appealed with the public to refrain from adjusting prices of products which are made locally.


By Eric Norman Mkwaira