Malawi’s monthly import cover calculating figure has jumped 1.5 percent to $191 million (US$454 762) from the $188.1 million (US$447 857) the Reserve Bank of Malawi (RBM) has confirmed, meaning that the economy’s usage of foreign exchange for imports is fast increasing.
This could be in view of the availability of foreign exchange which has pushed the import cover—the number of months of imports that could be paid for by a country’s international reserves—to above the internationally recommended three months threshold over the past months, signifying a measure of adequacy to hedge against a crisis.
In economics, one common rule of thumb is that foreign exchange reserves that can cover three months’ worth of imports, now about $573 million in Malawi, are adequate.
As of last week, the country’s foreign exchange position, a combination of official and private sector reserves, stood at $739 million, up from the previous week’s $ 726 million which is an equivalent of 3.93 months of import cover.
RBM spokesperson Mbane Ngwira told Business News yesterday the upward revision of import cover calculating figure is a result of looking forward based on how much foreign exchange has been at a particular period.
He said while it could be interpreted that the appetite for imports is growing, it could also not be entirely true because the figure may also go down.
But an investment analyst yesterday said the figure may have been revised upwards in view of inflationary effects on the global market.
“Perhaps the US dollar inflation may have gone up coupled with the global inflation. It could also mean that the import bill is increasing at a faster rate in view of the availability of the foreign exchange,” he said.
Analysts say official reserves are on the upward spiral because the RBM is buying foreign exchange from the private sector as the continued currency appreciation is influencing the private sector to dispose of their foreign exchange.
The kwacha has been appreciating since December 2013, as the tight monetary policy stance pursed by RBM has resulted in the mopping up of excess kwacha liquidity out of the market, resulting in reduced demand for foreign money.
Analysts have argued that the picking up of foreign exchange reserves will dampen pressure on imports.
However, what is critical is whether the country’s donors, who avail a huge chunk of foreign exchange after tobacco, will resume their aid after freezing $150 million in November 2013 due to looting of public funds at Capital Hill dubbed Cashgate.
Tobacco wires in more than half of the country’s foreign exchange earnings and with the tobacco sales in progress, there is expectation that forex reserves will increase, easing pressure on imports.
Already, in the first five weeks of the sales, the leaf has brought in $38.2 million in foreign exchange revenue.
Banda launches K20 billion Machinga-Chingale-Lirangwe road
President Joyce Banda has said road infrastructure is key to economic development, especially in rural hard to reach areas such as Chingale in Zomba where people have waited for a tarmac road for over five decades in vain since our independence.
Banda made the remarks at Namitembo Primary School ground in Zomba after she officially launched the 62 kilometre Machinga-Chingale-Lirangwe road, that will connect Blantyre, Zomba and Machinga districts.
She told the gathering the road was one of her dream and the launch marked the realisation of the vision of transformation of the people in the catchment area socially and economically.
The President said Chingale area is a potential agricultural area and the road will open up markets and easy transportation of farm produce to traders from Blantyre and other areas.
She also said the road will create jobs for the youth during construction adding she had asked the contractor, Mota-Engil, to reduce the construction, period of four years saying people in the area have been waiting for the road for a long time.
Turning to politics, Banda asked the people to vote for the People’s Party (PP) to be assured of continuation of special programmes such as Mudzi transformation, cow a family, goat distribution, public works and social cash transfer among others.
“When we take government on May 20, Mudzi transformation will continue until we have reached out to many needy people in the rural areas. The Farm In-put Subsidy Programme(Fisp) and the Farm Inout Loan Programme (Filp)will continue,” She said.
Banda also said the PP government will enhance railway and water transportation system on Lake Malawi saying soon she will launch a new water vessel being built by Mota-Engil to replace Ilala.
Emily Banda Roads authority board chairperson said the 62 km road, eight metres wide will have five big bridges with a life span of 20 years and expected to influence rural agricultural trading center opened such as Chingale, Chipini and Chimseu among others.
She, however, asked the communities to avoid encroachment, vandalism and thefts of road signs and other facilities adding these help road users to avoid road accidents.
At the same rally, PP Eastern Region Provincial Chairperson Samson Msosa announced that 300 United Democratic Front (UDF) supporters and 100 Democratic Progressive Party (DPP) supporters who said have joined the ruling PP of which 10 were paraded including the District Secretary.—Mana