The Reserve Bank of Malawi (RBM) says proceeds from tobacco have contributed to the stability of the kwacha and increased foreign exchange reserves.
In an interview on Friday, RBM spokesperson Mbane Ngwira said: “We cannot rule out the fact that the tobacco dollars are having an impact on the kwacha. There are some purchases that have been done from the market.
“However, as we also always put it, the stabilisation of the kwacha or increase in foreign exchange reserves is not entirely on account of the tobacco season because there is more than one source [of foreign exchange] that contributes to foreign exchange reserves.”
Since the 2018 Tobacco Marketing Season started in April, the local unit has remained stable at K730 to the dollar.
Besides this, gross official reserves have continued to increase and stood at $661.40 million or 3.16 months of import cover in the week ending May 25 2018, a rise from $658.56 million, about 3.15 months of import cover a week before, according to RBM.
Commenting on the trend, economics statistician Alick Nyasulu said the tobacco earnings flowing in, should lead to a continued stability of the local currency during the tobacco sales season.
But he said the country should not expect appreciation of the kwacha, since the market has become adaptive to the fact that tobacco revenues are not good enough to stabilise the currency.
Catholic University economics lecturer, Gilbert Kachamba, in an interview said the importance of tobacco as a foreign exchange earner cannot be overlooked.
Last year, the country earned $212 million (about K155 billion) from tobacco, a drop from the previous year’s $276.4 million (K202 million) due to poor prices. n