Reserve Bank of Malawi (RBM) says the slight appreciation of the kwacha against the dollar is a normal occurrence that happens from time to time largely due to market dynamics.
The kwacha, which has been largely stable for the past one year or so, has slightly appreciated from around K734 to a dollar to K730 this week, according to Financial Market Development report produced by the RBM.
In an interview on Tuesday, RBM spokesperson Mbane Ngwira said the slight appreciation is just one of those normal movements that occur in the market.
“The bigger picture is that the central bank is confident that at the close of this year and at least into the foreseeable future, the country is not likely to experience the usual seasonal lean period in terms of foreign exchange availability, thereby cementing the current stability of the exchange rate,” he said.
Traditionally, Malawi experiences significant seasonal volatility in its foreign exchange inflows with earnings from tobacco exports concentrated during the April to August period.`
However, the exchange rate outlook this year is far much better than last year. Commenting on the development, economic statistician Alick Nyasulu said reading too much into appreciation of the kwacha against the dollar would not be just, as there is likelihood of some donor fund inflows and proper management of the kwacha by the RBM which has so far been achieved.
He said in the short-term, there would be fluctuations either way, but the kwacha will largely remain stable.
He said: “The key thing to this success is managing market expectations, and so far, it seems to work. On the other side of the fence, questions remain that is the stability of the currency and other economic indicators of any benefit to the Malawian household?”
For his part, Catholic University of Malawi economics lecturer Hopkins Kabaghe said there is a possibility of a continued stabilisation of the kwacha on the back of abundant maize harvest.
“I see the kwacha appreciating more as we sell more maize to other countries since the maize will be bringing more foreign exchange into our economy,” he said.
Earlier, RBM said this is the longest period the kwacha has been stable, bringing certainty on the market.