Foreign exchange reserves pick up
Malawi’s gross foreign exchange reserves—a combination of official and private sector reserves— increased marginally last week from 3.39 months of import cover two weeks ago to 3.42 months as of Wednesday, latest figures from the Reserve Bank of Malawi (RBM) have shown.
Recent RBM Daily Financial Market Development report for February 16 indicates that as of last week, total official reserves increased to $715.02 million from $709.17 two weeks ago.
The marginal increase comes as the country is going towards the end of its lean period, usually between November and February, when demand for forex surges due to demand for fertiliser and farm inputs.
The increase also comes as the local currency; the Malawi Kwacha, has marginally weakened against the British Pound and the South African Rand over the past two months despite being steady against the United States Dollar.
Earlier, RBM expressed optimism that Malawi is not likely to experience the usual seasonal lean period in terms of foreign exchange availability, thereby cementing the current stability of the exchange rate.
In its Monthly Economic Report for January, investment management and advisory firm, Nico Asset Managers said the kwacha is expected to remain stable against the US dollar in the short-term due to continued availability of foreign exchange reserves, which are adequate to cushion the foreign exchange market and guard against the kwacha volatility.
However, Nico Asset Managers said the kwacha is also expected to depreciate in the medium to long term, on account of significant current account deficits, weak foreign direct investment inflows and strengthening of the South African Rand.