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Forex demand in bureaux falls— Reserve Bank of Malawi

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The Reserve Bank of Malawi (RBM) has said the demand for foreign exchange in bureaux has started to tumble due to the high price being charged.

RBM Director of Financial Markets Chakudza Linje made the observation during the 2022 Financial Market Dealers Association (Fimda) Annual Lakeshore Conference held in Mangochi at the weekend.

Over the past months, foreign exchange bureaux have been selling the dollar at around K1,400 despite the official rate standing at around K1,036 to the green buck.

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Some commentators even speculated that authorities may be pushed to match the bureau or black market rates as one way of eliminating the parallel market.

But responding to questions at the conference, Linje said bureau and black market rates are slowly proving to be attainable.

She said, of late, it is becoming easy to sell to the bureaux than to buy from them.

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She noted that at the moment the policy is to work with players in the banking sector to ensure that the currency reaches its market clearing level.

“At that level, all fundermentals speak to each other. The level of the currency, the level of foreign currency in the system and the level of local currency in the system all speak to each other.

“The way it is currently going, from where we are sitting on the bureau rate, it is highly speculative. It responds to a lot of news without really looking at the fundermentals. So going forward we want foreign currency that responds to market fundermentals that speaks to where the market is and that is at a market clearing level,” Linje said.

Malawi Confederation of Chambers of Commerce and Industry President Lekani Katandula, who is also Illovo Malawi Managing Director, asked Linje as to where the central bank predicts the local currency may settle after the price discovery process.

But Linje said, unfortunately for exchange rates, it is very difficult to predict where they would land.

She said, right now they are still internally discussing how the price discovery process will be implemented and that thereafter they will have discussions with authorised dealer banks once they finish the internal process.

“Where it is going to land will depend on how our communication with the authorised dealer banks will go. Because it would not be only about where we are thinking and what we are seeing. It would also involve what the authorised dealer banks are seeing in the market. So at the moment, it’s too early to say the ranges,” Linje said

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