The local currency, the Kwacha, is expected to stabilise in the near future on the back of fiscal and monetary policy actions currently being implemented by the Reserve Bank of Malawi (RBM), the Governor of the central bank has said.
RBM Governor Charles Chuka gave a dose of confidence after the fourth Monetary Policy Committee (MPC) meeting of the year that culminated into the reduction of the policy rate or the bank rate from 27 percent to 24 percent.
“Since the kwacha depreciated sharply last year, we had to take a second look at the instruments we use to manage the kwacha. We have intensified our money market operations,” Chuka said.
“People are now holding kwacha balances within the banking system. Normally, people would hide and keep the dollars, putting pressure on the kwacha. Because of this action, interest rates are at a level where people with large balances of cash would rather buy government paper than dollars.” he said.
The US dollar is selling at as high as K785 in most foreign exchange bureaus, according to RBM daily foreign exchange rate bureau rates report.
However, the kwacha strengthened against the British pound by 2.3 percent and traded at K961.47 at the end the second quarter on account of a weakening pound following diminishing investor confidence as Britain exited the European Union (EU).
Chuka said the central bank has also been managing the interbank rate—the rate of borrowing between banks—which has since seen it closing at a point better than the previous years.
Within the region, the kwacha weakened against the rand by 5.4 percent to trade at K48.29 from K45.81 per rand in the preceding quarter.