K5000 note might encourage money laundering, tax evasion-DPP

Joseph Mwanamvekha DPP Spokesperson on Finance
  • Dismisses the move could fuel inflation, prices going  up- Mlusu

The Democratic Progressive Party (DPP) has criticised government’s plans to introduce a new K5000 note which it fears might encourage money laundering and tax evasion.

The party’s Spokesperson on Finance Joseph Mwanamvekha expressed concern over the development which he described as worrisome for Malawians and the public.

He noted that countries with higher denominations in the region and other continents are those whose economies are in a crisis and not performing well.

Mwanamvekha cited the 1990’s Zimbabwe scenario which had higher notes in circulation with its own reasons hence his query to the country’s Finance Minister Felix Mlusu if there is a problem in Malawi.

He faulted the explanation given by the country’s Finance Minister Felix Mlusu where he stated the K2000 note will not be able to support the amount of Kwacha in circulation.

To be unveiled in February next year: The new K5000 note

“That’s why I was raising why do we have too much money in the system? It means there is too much money there and that’s why you’re seeing inflation continue to go down. And I was also saying when we have higher currencies, what happens is you’re actually encouraging money laundering, you’re also encouraging tax evasion because it’s much easier for people to keep higher currencies like K5000 even K10,000," explained Mwanamvekha.

Responding to the DPP spokesperson, Finance Minister revealed that when the Tonse administration came to power, the former governing party had already approved the introduction of the currency but was stopped almost at the last minute.

Mlusu stated that after its analysis to see if the move was justified with the existing market dynamics which had taken place, it resolved that the reasons were not good enough.

Acknowledging the development, Mwanamvekha stated that when the party analysed its impact and compared with other countries, it dawned on them that the situations were not similar hence abandoned the plans.

“So we thought at that point it was not good for the economy, it is not good for Malawians and also the currency itself; that’s why we stopped it but that discussion indeed took place but we stopped it” admitted the former Finance Minister  

Parried away any links of inflation to the currency release: Mlusu

Mlusu justified the impending release of the new note in February next year arguing the cost of printing notes will be reduced with the K5000 than importing so many notes at a high cost.

He indicated that currently, people are having to carry quite a lot of notes to buy or do small transactions and Treasury wants to consolidate the process to much smaller quantities but of high value.

“So that basically is the reason or among the reasons that we have decided to introduce the K5000 note next year. The introduction of this note when it comes into circulation next year does not mean that it is fuelling inflation; inflation has totally different factors that affect it. Inflation has to do with demand and supply, but here we’re just trying to reduce the cost of printing notes but also to consolidate the value of the notes into smaller quantities.

“So I was explaining that basis; so the people should not worry so much to link it to inflation that prices are going to go up because of the introduction of this note next year. There is no relationship whatsoever.

“It basically means that we’ll now be carrying in our wallets, in our pockets much smaller amounts of notes but of high value. So if you want to buy anything or if you want to go into a restaurant, you’ll not have to carry a basket of notes to go and pay for your meal” assured the Minister."

The Reserve Bank of Malawi announced it will introduce K5000 notes which will go into circulation from Thursday, February, 24, 2022.

Governor Wilson Banda justified the introduction saying the last time the country made such a move to introduce a higher note was the current K2,000 five years ago.

"Among other things, the policy guides that the highest value denomination should not account for more than 60 percent of the total value of the currency in circulation. When that happens  the bank can apply for a number of measures one of them being introduction of a higher bank note denomination," he said adding that the K2,000 bank note has hovered above 80 percent