Malawi’s international reserves including gold—assets that can be used for foreign payments between central banks—is one of the lowest in Africa, according to data from the United Nations Conference on Trade and Development (Unctad).
Data by Unctad analysed by Business News indicate that Malawi’s international reserves stood at $223.87 million (K100.7 billion, at current exchange rates) in 2012, rising from $198.12 million (K89 billion) in 2011.
The reserves, however, peaked at a high of $308.05 million (K139 billion) in 2010 since 1970, according to the data.
Sao Tome, Central African Republic, Guinea Bissau, Comoros and Eretria had lower reserves than Malawi while Zimbabwe, Swaziland, Lesotho, Mozambique had higher, the data show.
Topping the list in Africa of highest reserves include Algeria, Libya, Nigeria, Angola and Morocco.
Local economist Henry Kachaje, who is also managing director at Business Consult Africa (BCA), commenting on the levels of Malawi’s international reserves said the reserves give economic stability to a nation.
“They protect the nation from adverse international economic shocks. If Malawi had adequate international reserves, the withdrawal of donor support should not have had immediate impact on the kwacha value because the reserves should have cushioned the nation from such shocks.
“Malawi needs to grow its exports. We need to diversify from a seasonal to a regular export base by focusing more of growing sectors that will ensure continuous flow of forex. These areas include mining, tourism, manufacturing and service sectors,” he said.
In May 2012, Malawi devalued and floated the kwacha and subsequently in July the same year, the International Monetary Fund (IMF) approved Malawi’s $156 million (K70 billion) three-year Extended Credit Facility (ECF) to boost the country’s reserves.
According to Reserve Bank of Malawi (RBM) data, after hitting one of its lowest points in 2012, Malawi’s import cover as measured by the gross official reserves stabilised around two months in the 2013 fourth quarter (October to December), a situation that the RBM has said is comfortable with.
RBM spokesperson Mbane Ngwira said this week that the central bank has been targeting two months import cover as a rule of thumb, a measure which he described as credible.
But according to the RBM’s third quarter financial and economic report, gross official reserves stood at $429.3 million at the end of the third quarter of 2013, a drop from $449.8 million recorded in the second quarter of 2013.