Malawi needs a sound export base to balance the supply and demand of hard cash and rein the persistent loosening kwacha, Bankers Association of Malawi (BAM) has said.
The local unit has been depreciating rapidly in the third and fourth quarters of 2015, a situation one advisory firm, Nico Asset Managers, attributed to the speculation in the run up to the lean season.
Recent foreign exchange market indicated that the kwacha went to as far as K1 000 to the British pound and K668 to the dollar as of Wednesday this week, a development an analyst described as a deliberate move by banks to control demand and retain supply of the unit which is usually scarce during this period.
BAM president Misheck Esau, who is also chief executive officer of CDH Investment Bank, in an e-mail response to a questionnaire, noted that both private and public sectors have let the economy down by not investing in production for export.
Esau said there is need for a rapid and significant move by the private sector to invest in production for export to bridge the balance of payments gap that will bring the exchange rate stability.
“We cannot continue to import basic commodities from countries whose agricultural history is not as rich with heavy investment by government like that of Malawi,” he said, adding that there is little hope for 2016 as far as exchange rate stability is concerned if the country does not invest in production, including that of such staple commodities.
Esau further encouraged the private sector, particularly those whose businesses are predominantly importing to rethink their business models towards diversification into exports to mitigate risks they face as they go about the import business.
The RBM has, in the just-ended year, been implementing a number of measures to help the kwacha gain ground, among which was the revision of the monetary policy known as policy rate by two percentage points to 27 percent from 25 percent. n