Malawi state of forex reserves remains sloppy

The Malawi central bank, Reserve Bank of Malawi (RBM), has in its weekly financial brief indicated that official foreign exchange reserves it has continued to decline, a development that means the country could be headed towards a forex crisis.

According to the bank, the forex reserves declined to US$471.1 million which translates to just 1.88 months of imports.

Dr Wilson Banda Reserve Bank of Malawi Governor-pic by Gracian Jeke Mana

On September 24, 2021 RBM had US$537.7 in its reserves that translated to 2.15 months of imports.

Unfortunately, the decline is registering at a lean period when demand for forex is rife.

“The loss in reserves represents reduced liabilities on the part of the central bank,” the RBM brief reads.

Malawi’s economy gets sturdy between April and September when the country exports its major forex earner tobacco

According to the brief, during this lean period “there is always a mismatch between forex demand and supply as the country imports more than it exports.”

RBM Governor, Wilson Banda, has recently admitted that the country was facing forex woes.

“The central bank’s hope lies in IMF’s Extended Credit Facility to turn around the situation without which the country would be sailing in thorns in terms of foreign exchange availability,” Banda told the press.

The IMF mission, however, recently told Malawi to put its economy in order if the Bretton Woods’ institution were to start processing another facility.

The mission team, led by its African Department Director Abebe Aemro Selassie, said Malawi should address issues such as debt which is now at K4.7 trillion, and the Democratic Progressive Party’s misreporting to IMF on Gross Reserve Assets and Net International Reserves for 2018 to 2019.

“These couple of issues need to be addressed and, as soon as they are addressed, we should be in a position to move forward with the programme with the IMF,” he said.

The scarcity of foreign exchange negatively affects the Kwacha performance, which has already been depreciating lately.

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Aubrey mutale
Aubrey mutale
14 days ago

The kwacha is overvalued.

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