Foreign reserves dip as kwacha exerts pressure
Dwindling revenues from tobacco and continued depreciation of the kwacha are still exerting pressure on the foreign reserves position which is now standing at 2.9 months of imports.
This is despite the progress registered in offloading tobacco at the auction floors as the high rejection rates have seen the country only managing to earn $173.2 million from tobacco sales since the start of the marketing season.
In its market update, the Reserve Bank of Malawi (RBM) said gross official foreign reserves stood at $602.44 million at 29 July, representing a 2.88 months cover. The figures show that the reserves position declined during the week under review as compared to the preceding week.
As at July 22, 2016, the gross official reserves stood at $630.96 million representing three months of imports.
The fluctuation of the reserves is likely to continue as the tobacco market continues to perform poorly.
According to AHL Group tobacco sales update, 15 percent of the 110 million kilogrammes of all types of tobacco had gone through the auction.
High rejection rate continued at Limbe and Mzuzu auction floors, which has resulted in low seasonal sales throughout this year.
Meanwhile on the money market, as of Tuesday, August 2, the Kwacha depreciated against the US dollar, EUR and the South African Rand, only appreciating to the British Pound.
According to RBM, the Malawi Kwacha was expected to trade at around K K720.40 against the US dollar on Wednesday.