Kwacha Loosing Grip Against Major Currencies MK405 To Us Dollar
Malawi’s local currency Kwacha is loosing it grip against all major currencies as pressure continues to mount on as the lean period gets into full swing, resulting to a fall in the value of the kwacha which was trading at K405 to one United States dollar at bureaus yesterday from K350 just a few weeks ago.
In the formal high street banks, the kwacha was trading at an average of K397.
However, Financial Market Dealers Association of Malawi (Fimda) President Alfred Nhlema said on Wednesday the current depreciation is only seasonal as demand normally outweighs supply during the post tobacco sales season.
“This trend and occurrence is not new in the Malawi economic calendar,” he said.
Nhlema said the kwacha appreciated significantly between April and August mainly on account of improved tobacco proceeds and the clearance of the backlog of forex remittances.
He said the current situation can be managed to acceptable levels by both the market as well as monetary and fiscal authorities since the country is still sitting on considerable reserves.
“In any case, most invoices being settled are current and not arrears,” said Nhlema.
As of last week, Malawi’s gross official reserves at the Reserve Bank of Malawi stood at US$442.6 million or 2.4 months of import cover.
Nhlema said given that the country still has current invoices, the market will soon correct itself through the natural price discovery mechanism.
“A high exchange rate will normally inhibit demand and this will create a stabilising factor on the price, in some cases a downward pressure on the currency,” said Nhlema.
He said RBM can speed up this process by mopping up liquidity from the market using foreign exchange interventions.
However Reserve Bank of Malawi (RBM) Governor Charles Chuka recently said Malawi has achieved relative stability in less than 18 months, saying the economic storm which started in 2010 is now fairly under control and Malawi is now ready to take the path to glory.
Chuka made the remarks while delivering a key note speech at the opening of the 2013 Society of Accountants in Malawi (Socam) annual lakeshore conference in Mangochi last month.