Cumulative revenue from all tobacco types has gone up to $72 million, a 27 percent increase from last week’s $57 million, Auction Holdings Limited (AHL) week eight sales summary has shown.
While the revenue may be rising at a faster rate in dollar terms, the rise in kwacha will not be that much because the local unit is fast appreciating, which means reduced earnings in kwacha. Currently, the kwacha is trading at K400 in some authorised dealer banks (ADBs) compared to around K420 when the market was being opened in March.
The kwacha has been gaining in value largely due to the proceeds from tobacco, Malawi’s main foreign exchange earner accounting for more than half of all foreign exchange earnings, which has boosted foreign exchange reserves resulting in the surplus of the hard cash on the market.
The sales summary shows the revenue realised is out of 41.6 million kilogrammes (kg) of the leaf sold at an average price of $1.74 per kg.
Out of this, burley amounting to 39.1 million kg raked in $65.7 million at an average price of $1.68 per kg, flue cured raised $6.1 million out of 2.2 million kg of the leaf sold at $2.69 per kg.
Sales of northern dark fired tobacco, which started last week, brought in $480 272 with 199 352 kg sold at an average price of $2.41 per kg compared to $2.12 per kg during the same period last year.
“While burley weekly averages continue to rise, burley volumes sold per week fell for second week in a row having peaked in week six. As the market progresses, leaf styles are emerging making up 39 percent of sales in week eight on the burley sales,” reads the commentary from the tobacco auctioneer.
The previous week, AHL said weekly average prices have continued to rise.
It said that bale throughput (which is the percentage of bales sold weighed against sales capacity) stood at 65 percent in week seven.
But it said highest throughput for the season was observed in week six when 83 295 bales were sold representing a 67 percent throughput.
Malawi is this year expected to realise about $300 million from the leaf which accounts for 13 percent of gross domestic product (GDP), up from last year’s $177 million when the country realised the worst output in 18 years at 79 million kg.
Already, with the tobacco dollars trickling in, the kwacha, which has been on a free-fall since May 2012, when authorities devalued the unit by 49 percent and subsequently adopted a market-determined exchange rate, has started appreciating and is now trading at around K400 to a dollar.
The proceeds from tobacco have started boosting the country’s foreign currency reserves which could be useful to anchor the kwacha and also help the private sector to procure fuel and raw materials for production purposes.
The import cover, the determinant of the country’s ability to import goods and services in a specified period, is slightly above one month now, an equivalent of $188.1 million against the internationally recommended minimum of three months [$564m].
In an earlier interview, Tobacco Control Commission (TCC) chief executive officer Bruce Munthali expressed confidence with the level of proceeds this year compared to the same period last year.
He said if the trend continues, Malawi is poised to have a favourable tobacco market season this year.