Malawi’s Minister of Finance Ken Lipenga has expressed pleasure over the improved foreign exchange reserves on the market which he said will spur confidence among private sector players.
Lipenga said this in an interview on Monday in reaction to the pick-up in the country’s import cover which has shot up to over two months as at 19 June 2013.
Gross official reserves have picked up to an equivalent of 2.15 months of import cover which is double the amount of foreign exchange which the country had accumulated as at end April, 2013.
Said Lipenga: “Obviously, the availability of foreign exchange reserves to over two months cover will contribute a lot to sustaining the confidence that the private sector has in the economy.”
The minister said it was pleasing to note that apart from the improvement in foreign exchange build-up, most economic indicators are pointing to the right path.
The pick-up in foreign exchange reserves come at a time when tobacco marketing is at its peak and has seen the market earning more than $200 million in revenue at auction floors level.
Tobacco alone accounts for over 60 percent of Malawi’s total export earnings and this year government expects tobacco proceeds to hit $300 million up from $177 million earned in the 2012 season.
According to the Reserve Bank of Malawi (RBM) statistics, as at 19 June, 2013, gross official reserves had accumulated to $404 million which according to the central bank is an equivalent of $2.15 months of import cover.
Gross official reserves improved to $215.4 million or 1.2 months of prospective imports as at end April 2013 which was also a significant improvement from $185.4 million, an equivalent of 0.9 months of import cover registered in the preceding.
Malawi’s monthly foreign exchange reserve requirement is pegged at $188.1 million, an upward revision from a monthly demand of $129 million.
With tobacco dollars trickling in on the market, analysts have said the closure of the market somewhere in September could prevent further appreciation of the kwacha and propel a huge demand for foreign currency on the market as then foreign exchange will likely be in short supply.
But, authorities are keeping their fingers crossed that should donor inflows-which is another most important source of foreign currency—be steady in the first half of the 2013/14 financial year, the situation could help the local unit to continue firming to other international currencies, notably the dollar.
RBM Governor Charles Chuka told Nation Online in a recent exclusive interview that he expects significant improvement in the country’s foreign reserve position backed by the inflow of tobacco foreign currency as well as strong package of both monetary and fiscal policy implementation.