Malawi currency, the Kwacha has continued on its weaker path onslide against major foreign currencies, and is now being sold in cash at K595 to a dollar according to foreign exchange bureau rates report from Reserve Bank of Malawi (RBM) while on the parallel market or black market it is hitting around K700.
Central bank spokesperson Mbane Ngwira explained that the devaluation has been induced by huge demand for forex and at the same time market speculation as Authorised Dealer Banks are hoarding forex in anticipation for better rates at a later stage.
Analysts say some major cause of forex shortage is the long-term fertiliser subsidy programme. With all its good intentions—to end hunger thereby contributing to poverty eradication, the subsidy requires thousands of drums of forex to import. Since the programme started in 2005, Malawi has been spending not less than K20 billion annually on the programme.
The country’s import bill for fuel, cement, metal bars and other construction materials has spiralled, victims of our own growth.
The other cause is the unscrupulous business people who siphon forex out of this country through fraudulent import transfers, hoarding, fake holiday packages and by literally zipping US dollar bills in the trousers while on foreign trips.
The fourth cause which has been controversial before is the state travel bill.
In the opinion of economist and Press Corporation Limited group chief executive officer, Professor Mathews Chikaonda, kwacha is losing its value because the country is still not able to generate enough foreign exchange to meet its import needs.
“We need to accept our reality. Just because we are in the tobacco marketing season is not a guarantee that we will have enough foreign exchange. RBM needs to keep some for the rainy day,” he said.
He advises that instead of just being an importing nation, the government needs to seriously implement export diversification drives to help the economy cope during the lean period.
The economy is currently facing pressure on the foreign exchange market largely due to speculation despite the country still selling tobacco, which wires in about 60 percent of the country’s foreign exchange earnings.