Reserve Bank of Malawi (RBM) has described the slight appreciation of the kwacha against major trading currencies as a normal seasonal occurrence coupled with lower fuel prices due to reduced demand amid the novel coronavirus (Covid-19) pandemic.
RBM spokesperson Mbane Ngwira said in an interview on Tuesday that the developments in other countries, like South Africa, have led to the depreciation of those countries’ currencies against others, including kwacha.
He said: “Considering our seasonality, this is tobacco marketing season and expectations are for the market to have enough foreign currency.
“The market has opened on a high note and forex will be flowing in. On the demand side, flow of imports has reduced furthermore oil prices have come down representing lesser demand for forex. All in all demand is expected to be less than supply hence a stable kwacha.”
RBM’s Financial Market Developments Report indicate s that the local unit has appreciated against the British pound, euro and rand to trade at K929 from K974, K811 from K827 from K40 and K51 in January, respectively.
To the dollar, the kwacha has however remained largely stable, but slightly appreciated to the current K742 from K744.
Economic statistician Alick Nyasulu, while pointing out that the development filters less in the economy given the current scenario, said weak currencies are good for the country’s imports.
He said: “Indeed the pound has steadily been on the decline for many months and Covid-19 just made it worse.
“Nonetheless, weak currencies especially those from countries we trade most with is good for our imports though price gains may be impacted with reduced transport services.”
Meanwhile, available figures from RBM indicate that gross official reserves have been on the rise and closed the year 2019 at $846.6 million equivalent to 4.05 months of imports from $656 million which is equivalent 3.14 months of imports.
Similarly, foreign exchange reserves held by the private sector increased to $324.1 million or 1.55 months of imports in December 2019 from $310.3 million equivalent to 1.48 months of imports.
In February, gross official reserves were estimated at $775.5 million which was equivalent to 3.7 months of import cover