Malawi’s gross foreign exchange reserves—a combination of official and private sector reserves— slightly fell to 3.48 months of import at the start of this week, Reserve Bank of Malawi (RBM) figures have shown.
RBM daily financial market report for October 11 indicates that the gross official reserves declined to $726.80 million, equivalent to 3.48 months of import cover on October 9 from $750.23 million which is equivalent to 3.59 months of imports.
In the recent past, the RBM has achieved a higher reserves position anchored by what the bank described as a capacity by the central bank to enhance its open market operations and a recent disbursement of the $84.3million World Bank budgetary support.
This has been achieved although the tobacco market performed dismally attracting only$212 million from the 2017 marketing season, an indication that the share or importance of tobacco as a foreign exchange earner is being overtaken by other imports.
Traditionally, Malawi normally experiences significant seasonal volatility in its foreign exchange inflows with earnings from tobacco exports concentrated during the April to August period.`
However, for quite a while, demand for foreign exchange in the market has been matched by supply and that the market is able to clear.
But explaining the slight fall of reserves in an interview on Wednesday, RBM spokesperson Mbane Ngwira dismissed fears on the slight drop of the reserves describing the fall as a normal occurrence in the movement of reserves.
He said: “This is nothing people should be worried of. We make payments, we buy more and in the end we get back to position.”
Ngwira said the Central Bank is confident that in 2017 and at least into the foreseeable future, Malawi is not likely to experience the usual seasonal lean period in terms of foreign exchange availability, thereby cementing the current stability of the exchange rate.
Economic commentators have also on the other hand backed central bank’s efforts to retain the economy by putting in place sound structural reforms to anchor the reserves.