LESSONS FROM SEYCHELLES';ON DEVALUATION OF KWACHA AGAINST TOURISM

Desclaimer:Unedited,My views

I hate the name they call it;devaluation of the Kwacha? i would rather put it as a CONVERTIBLE currency,free to float  and not a CONCENTRATED ONE which was  gluttony of foreign currency in the previous regime.Will people accept this or  framing my PHD on the wall and people  start believing in you  OH ! yeah, i will talk about the past because it is gone and i can ably rewind all of it at once but JBs regime give it time we shall see when we cross the bridge or should i just say they are wrong before we see one or two eggs hatch into monster   or  a good-chick.? tell me now.

To Tourists and Volunteers The central Bank has allowed you  to settle your local bills in any convertible major foreign currency or in Malawi kwacha again. It was the same bank under former boss Perks Ligoya who came before the microphone and  said that all tourist operators shall ensure that foreign exchange obtained in the course of business is deposited into the Foreign Currency Denominated Accounts (FDA) or is sold to an authorized dealer in foreign exchange within the country.

Hotels Resorts and other related operators  maintained appropriate records on all foreign currency transactions and submitted monthly returns/Reports to the country’s central bank. This statement came with warnings that failure to comply with the requirements will result in withdrawal of licence or penalties in line with Financial Services Act which has been shelved for my homework ,aah LAZY ME.

Last Tuesday just like we expect more to change not only Ministerial positions , RBM under the new boss Charles Chuka before he even booked for a weekend room night stay along the lakeside Resort to celebrate his appointment has  announced the devaluation of the local currency bowing down to the World bank demands to  devalue the so called artificial overvalued currency,exchange rate from K168 to K250 per United States dollar.

 This comes in the wake of the proposed Comprehensive Plan  put in four areas:

•  Regaining macro balance,
•  social impact and mitigation,
•  Growth rebound – including where growth and jobs would come from, and
•  the medium term agenda for productivity and diversification. 

Last time kWACHA  was touched we were told that it was devalued by only 10% from MK150 to US$1 to MK165 to US$1. This was the time The Late President Bingu WA Mutharika was still under this plannet earth.

 The RBM Chief clearly indicated that this devaluation, the kwacha is now fully liberalised, which shall mean what? Demand and supply power i guess.

This is the opposite of what the former head of state would have loved to see.He wanted a concentrated Kwacha which swallowed alot of foriegn currency in turn (I love to repeat this part)

LESSONS FROM SEYCHELLS ON FLOATING CURRENCY aka DEVALUATION AND TOURISM

Sychelles Tourism is one of the sectors of their economy contributing about 16.6%  of GDP apart from fishing .Bingu just like the Former President of Seychelles Albert Rene wasted  energy talking about the effects of devaluation rather than the advantages of the free convertible currency which given time stabilises and the economy is brought to a recommended normalcy per world financial bodies.
Rene tied  the Seychells Rupee as if he is the only citizen in the country. In fact scholars do not have a conclusive answer on devaluation so alternative measures should always be given a try.When they lastly though very late ,The Minister of  Finance of African Development Bank Danny Faure  wrote at the nod of the USD20 Million loan for turning around the economy he said: The liberation of the exchange rate regime has lifted the severe constraints on the development of the economy and the government is committed to the floating of the currency.(Rupee).

The African Development Bank document of SEYCHELLS Appraisal in paragraph clearly paints  the spirit  of a country that sacrificed alot to bail its citizens out of the economic hardships., you can read on ,patiently AND Agree with Charles Chuka when he said its a big sacrifice,echoe with Goodall Gondwe when he fearlessly said it was long ovedue.Seychells sailed in troubled water for just a year and some months and we need this big patience  as JB requested us to  go through this period and 18 months seems good projection.This is the only price to pay.

The Seychells Appraissal by AFB-come-on read on please so that we understand this necessary evil.

You can personally check this site   article: 2.2.5 (www.afdb.com/seychellsappraissal)

As regards the government budget, the overall fiscal balance on cash basis (including grants) moved from a surplus of 1.7% of GDP in 2005 to a deficit of -6.2% in 2006, and stood at -9.7% in 2007. In 2008, although the fiscal deficit improved slightly, it remained negative at -3.7% of GDP. These deficits, associated mainly with high spending in the social sector and net transfers to the parastatal sectors (accounting for over 29% of total government expenditure and net lending in 2007), have been financed by external borrowing.

As regards the country’s external position, the current account deficit deteriorated to -32.1% of GDP in 2008 compared to -23.4% in 2007. Foreign exchange reserves dwindled so rapidly that import coverage fell to the equivalent of 0.1 month imports by end-2007, before increasing to 0.7 months import cover by end-2008.

  First review of the SBA in March 2009, the IMF concluded that program implementation was broadly satisfactory, reflecting the authorities’ strong commitment and ownership of the reforms. The exchange rate has stabilized and the parallel exchange market has disappeared. Interest rates have begun to ease from their peak, and inflation is declining rapidly. Implementation of the frontloaded reform program has led to early positive results.

To major investors’ devaluation is bonus for tourist visitors, compaired to their  home currencies and this might increase tourists’ traffic than before.

They devalued by 33%  in Seychelles and it paid off in the tourism industry at last. 
The  the number of kwacha a tourist can buy for  foreign currency eg Dollar, the affordable the destination it becomes.Then one thinks we might be so cheap ,no not at all The turnover of such development will or forever turn around the economy because of  lot of forex and the growth of revenue .However Tourists operators should see this as  a longer term solution because some of the supporting industries rates of commodities' like for upgrades of property construction/refurbishment  might jump but in line with the liberised exchange rate.

 Sunbird Tourism the biggest chain posted 6% loss attributing to the poor Macro-economics environment which detered the usual good business they enjoy  the year ended 31 Dec 2011 according to Nation 07.05.12 published their financial statement.There is a ray of hope though.

This is another direction that should start with swallowing a bitter but energy packed pill.

Malawi can also get there like Seyshells