The kwacha gained about six percent against the dollar on the back of Reserve Bank of Malawi (RBM) tight monetary policy, speculation and the start of the marketing season for the country’s major forex earner, tobacco.
Data provided by the RBM indicates that since January 10 when the kwacha started showing signs of stability, the local currency has gained about K27 from selling at K449 to the dollar to K422 on April 2.
However, the start of the tobacco marketing season last week has accelerated the ascent of the local unit.
The tobacco marketing season resumed with Lilongwe Auction Floors opening on Monday March 24, followed by Chinkhoma on March 25, and Limbe on March 26. Mzuzu is going to open later.
During the first week of trading Malawi has realised about $5.9 million (about K2.4 billion) about 92 percent higher than $3.1 million (about K1.1 billion) realised in the first week last year, according to a market update compiled by the Tobacco Control Commission (TCC).
During the week about 5.1 million kilogrammes of burley tobacco were sold against 2.4 million kilogrammes sold during the same period last year, which represents a 112 percent jump.
Apparently in response to the tobacco dollars that have started trickling in, the kwacha has taken a steep ascent gaining about one percent just in one week.
Tobacco being Malawi’s main forex earner, it determines the kwacha with traders speculating on the behaviour of the local unit ahead of or after the marketing season of the leaf.
Tobacco Control Commission (TCC) chief executive officer Bruce Munthali recently said the country expected to produce 167 million kilogrammes of burley tobacco, 21 million kilogrammes of flue cured and three million kilogrammes of dark fired tobacco.
The TCC chief said demand for burley is expected to range between 150 and 160 million kilogrammes, slightly below the projected production for the leaf, however demand for the other tobacco types corresponds with production.
The Minister of Agriculture and Food Security James Munthali recently said the government is optimistic with this year’s tobacco marketing season saying recent demand projections of the leaf now correspond with the country’s estimated production.