Businesses operating in the country have decried the depreciation of the kwacha against major trading currencies, especially the dollar, saying it has burdened them with higher costs in a bid to keep afloat.
Malawi Confederation of Chambers of Commerce and Industry (MCCCI) president James Chimwaza said in an interview yesterday that the negative effect of the depreciation of the kwacha is that the currency’s volatility has left businesses struggling to remain afloat.
He said: “Bearing in mind that we are net importers, the depreciation of the kwacha is a painful experience that businesses are having to face.
“If we were producing, we would be competitive but this is not the case in our
country. The sad reality is that for as long as we keep on importing, we will suffer.”
However, Chimwaza was quick to point out that the time has come for businesses to take advantage of the weak kwacha if they are to remain afloat.
“The depreciation of the kwacha should be a wakeup call to the country. Businesses need to seize opportunities that are within the country. This is the time we can, for instance, properly package our tomatoes to sell outside the country and get better prices,” he said.
The kwacha was relatively stable for about four years, trading at K740 to a dollar until the second half of 2020 when it depreciated by 0.2 percent.
Since then, the kwacha has remained volatile to date with latest figures from the central bank showing it is trading at around K823.96 to a dollar.
Cumulatively, as of October 1, the kwacha depreciated against all currencies of major trading partners, in the process losing K30.77 in value against the dollar, K30.66 against the pound, K71.40 against the euro and K2.75 against the rand, Reserve Bank of Malawi (RBM) figures show.
Meanwhile, RBM figures show that the gross official forex reserves have since fallen from $604.50 million, which is an equivalent 2.42 months of import cover in August to $521.87 an equivalent of 2.09 months of import cover in September.
As a short-term measure to ease foreign exchange liquidity challenges, RBM in August announced the re-introduction of the mandatory sale of export proceeds.
Under the new provision, exporters are required to sell a minimum of 30 percent of their export proceeds to authorised dealer banks while retaining 70 percent of the proceeds in their foreign currency denominated accounts.
RBM Governor Wilson Banda earlier said the injection of part of proceeds into the system to provide liquidity is meant to help the bank improve the country’s foreign exchange reserves.
In the short-term, Banda said the central bank is also looking at arranging facilities with regional and international banks to provide the country with short liquidity in foreign currency.
Last year, the kwacha depreciated by about 4.6 percent against the dollar