The Malawi Kwacha has appreciated against the US dollar from K420 to trade at K380 from Monday this week in what economic analyst say is due to the inflows from the tobacco trade – Malawi’s main foreign exchange earner accounting for more than half of all foreign exchange earnings.
Exchange rates monitored by Nyasa Times from Monday at National Bank of Malawi, Malawi Savings Bank and Indebank indicate that the Kwacha is this week trading at no more than K380 due to steady flows from tobacco sales.
According to the Auction Holdings Limited cumulative revenue from tobacco types has gone up to $72 million with burley tobacco fetching an average price of $1.68 per kg.
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.
The Reserve Bank of Malawi also confirmed that proceeds from tobacco have started boosting the country’s foreign currency reserves which may continue anchoring 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 [$564 million].
The central bank said Malawi’s gross official reserves improved to $206 million as at 26 April 2013, raising hopes for increased availability of foreign currency to meet the country’s strategic imports.
Such a reserve position is an equivalent of 1.10 months of import cover, according to the daily money market statistic published by the Reserve Bank of Malawi (RBM).
In the past few weeks, there has been a turnaround in most of the country’s macroeconomic indicators as indicated by the stabilisation of the local unit, an improvement in the foreign exchange reserves and easing of inflation rate which has for the first time in the past 12 months registered a drop, marginally decelerating to 36.4 percent in March from 37.9 percent in February thanks to improved food availability in most parts of the country which contributed to the fall in the food inflation basket.
And Treasury Bills (T-bills) rates have declined from an average of 43.05 percent on March 26 to 36.43 percent on April 30 moving down by a whopping 15 percent in the period.
“We should be expecting a consequent decline in commercial interest rates as a result of the decline in the T-bills rates,” pointed out University of Malawi economics professor Ben Kaluwa,
“The decline in the rates is an indication that government is reducing its appetite on domestic borrowing, consequently creating less demand for T-bills, thereby causing a decline in the rates,” said Kaluwa.
President Joyce Banda often tells Malawians at rallies that they should be patient as her economic reforms would “pay off soon”.Follow and Subscribe Nyasa TV :