Malawi’s gross foreign exchange reserves have jumped 31 percent from an equivalent of 1.26 months import cover on May 3 to 1.65 months by May 10 indicates Reserve Bank of Malawi (RBM) report.
RBM daily financial market report for May 16 indicates that the gross foreign exchange reserves have increased from $240 million in week ending May 3 to $306 million by week ending May 10.
The current reserves are halfway from the recommended three months import cover. Similarly, private sector reserves have improved from $260 million to $276 million in the same period.
Apparently, the bolstering of the reserves may ensure that the country gets critical imports and anchor the kwacha during peak foreign exchange demand period.
In the past weeks, the kwacha has marginally appreciated thanks to the tobacco marketing season and the tight monetary policy being implemented by RBM.
The central bank has recently been buying foreign exchange from commercial banks due to illiquidity and improved foreign exchange availability. RBM increased injections buying foreign exchange from the market worth K17.4billion between April 26 and May 13.
Commenting on the current trends in the kwacha and the International Monetary Fund agreement, Ministry of Finance spokesperson Nations Msowoya welcomed the appreciation of the kwacha and the increase in the reserves.
“The liberalisation of the foreign exchange market has eliminated the premium between the formal and informal foreign exchange market, this has resulted into increased inflows in the formal banking system than was not the case thirteen months ago. As a result RBM is now able to buy foreign exchange from the market to build its reserves. These reserves are important because they are used to defend the kwacha in time of scarcity,” said Msowoya.