Kwacha under severe pressure
After weeks of stability and subsequent gain, the local currency has found itself in another shocking swing, sharply losing value to almost all major trading currencies, Business News has learnt.
The kwacha, according to mid-rates sourced from Reserve Bank of Malawi (RBM), shed 2.3 percent against the dollar to trade at K615.79 as at December 3 2015 from a rate of K602.07 recorded on November 27 2015 in authorised dealer banks (ADBs).
The local unit has also sharply weakened against the British pound during the same period, to sell at K928.06 from K902.24.
The situation is also the same against the South Africa rand and euro, as the local unit has ceded 2.4 percent and 2.5 percent to trade at K43.13 from K42.14 and K654.52 from K638.79, respectively.
However, the situation is even worse among foreign exchange bureaus with another RBM market report dated December 4 2015 showing Lilongwe-based Midland Forex Bureau selling the dollar at K660 while buying the same at K620.
Other bureaus are selling a dollar at a range of between K635 and K655, according to the central bank’s market report.
A foreign currency parallel market dealer in Lilongwe said as of yesterday, the kwacha was selling at around K670, but said indications are high that the rate will continue to depreciate in view of excess demand for dollars on the parallel market.
Between July and August this year, the domestic currency experienced a sustained downward trend, depreciating by more than 30 percent.
According to the latest World Bank publication on Malawi, Malawi Economic Monitor, the currency tends to depreciate in value from September onwards after the end of this season, when the supply of foreign exchange declines.
According to the bank, the depreciation will also be induced by large-scale fertiliser imports sourced under the government’s Farm Input Subsidy Programme (Fisp) with consequent increases in the demand for foreign currency.
Earlier in the year, the International Monetary Fund (IMF) Mission Chief to Malawi Oral Williams explained that as confidence in the United States (US) economy has grown, the value of the dollar has also increased on average against all major currencies. n
