Commercial banks in the country are competing to buy foreign exchange (forex) earnings from tobacco, a development Financial Markets Dealers Association (Fimda) says is normal.
Reserve Bank of Malawi (RBM) spokesperson Mbane Ngwira in an interview on Saturday said RBM was not buying from the market while at the same time, buying rates have been varying from one bank to another despite a stable selling rate.
He said: “When you receive forex, you are obliged to surrender 40 percent to the bank and can keep 60 percent in the foreign currency denominated accounts.
“If there’s anything remaining, banks sell to RBM and it adds on reserves.”
While selling rates have remained unchanged at around K745 to the dollar, authorised dealer banks (ADBs) are buying a dollar at between K729 and K732.
Malawi experiences significant seasonal volatility in its forex inflows, with earnings from the key tobacco export crop concentrated during the March to August period.
In contrast, key import requirements, such as fertiliser procured for the Farm Input Subsidy Programme are sourced during October-December.
This leads to a cyclical pattern of upward pressure on the kwacha during the tobacco earnings season, followed by downward pressure during the lean season.
Fimda president Patricia Hamisi yesterday described the development as a normal strategy among banks.
She said: “Banks indeed compete for tobacco forex mainly to attract farmers to bank with them in the next season.
“Tobacco dollars are the surest source a bank can have so the competition is there indeed and this is not out of the ordinary or specific to this year.”
Available figures provided by AHL Group indicate that after five weeks of sales, the country has raked in $39.4 million (about K29 billion) from 25.8 million kilogrammes (kg) of all types of tobacco sold at an average price of $1.53 (about K1 130) per kg.