Malawi: Does a Weak Currency Mean a Weak Economy?

12 November 2014

"Every time the Kwacha plunges, Malawians panic, and begin to point the finger at which ever political party and politician they do not like. There is nothing wrong with panic over a depreciation of the currency, especially in an economy like ours, because it has injurious inflationary effects, as we do not have sufficient foreign currency reserves to suffice for our balance of payment deficits.

But while I have followed arguments and debates on social networks and various mass media platforms, I have observed that there is a rampant erroneous assumption that a devalued currency or a weak currency against the dollar, means the economy is weak and the country is poor, and that the stronger a currency trades among the major currencies, then the stronger the economy and the safer.

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