Forex supply under pressure

Foreign reserves are still under severe pressure with latest market statistics pointing that both gross official and private sector reserves continue dwindling.
The situation has in turn continued to strain the exchange rate movement, with the kwacha depreciating against all major currencies in the month of August and particularly slipping to K635 against the dollar in some foreign exchange bureaus as at September 10 2015, according to Reserve Bank of Malawi (RBM) figures.

The kwacha has depreciated by 10 percent in August 2015 and depreciated by 16 percent in the month of July 2015.
Figures show that gross official reserves—under the direct control of RBM—dropped during the week ending September 10 2015 compared to the preceding week’s $672.6 million (or 3.22 months of import cover) from $677.7 million (or 3.24 months of import cover) as at September 4 2015.
As at August 28 2015, gross official reserves were estimated at $682.7 million (or 3.27 months of import cover).
A figure of $209 million is used in the calculation as monthly foreign exchange consumption by RBM.
Meanwhile, Nico Asset Managers Limited, a Blantyre-based investment management and advisory firm, observes in its latest monthly economic report for August that the currency has continued to depreciate despite the implementation of various forex trading guidelines by RBM that were expected to control the pace of the currency depreciation in the short-term.
The kwacha, according to the firm, is expected to depreciate further in the short-term as the lean season approaches and donors continue to withhold budgetary support.