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‘Forex situation under control’

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Ralph Tseka

The Reserve Bank of Malawi (RBM) has said there is no need to press the panic button over forex situation, saying the country is sitting on a combined 3.4 months of import cover in public and private sector reserves.

This comes amid concerns that the forex situation remains volatile in the country evidenced by continued loss of value in the local currency, the kwacha.

RBM Public Relations Director Ralph Tseka told journalists in Mzuzu on Wednesday that the official public reserves stand at 1.8 month of imports while reserves in the private sector are seen at 1.6 months.

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“Even if we have a huge problem [in the official public reserves], we actually buy the forex from the commercial banks,” Tseka said.

Ironically, in what is seen as a desperate attempt to contain pressure emanating from depleted forex reserves in the country, RBM last week directed that 30 percent of all foreign exchange revenue from sales of tobacco—Malawi’s main forex earner—be sold to it.

In an exchange control circular number 1/2022, the central bank also directed that all exporters sell 30 percent of their export proceeds to it through the receiving authorised dealer banks within two working days.

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But Tseka said the directives were normal moves in managing the forex situation within a given period.

“The idea is to make sure that foreign exchange is available to every sector, not only the tobacco merchants,” Tseka said.

He said, as the government has been sourcing forex from the central bank for importation of key commodities such as fertiliser, fuel and pharmaceuticals, there was a need to safeguard the reserves.

Figures from the central bank show that, as at February 28, gross official foreign exchange reserves stood at $385.40 million, representing a 1.54 months’ worth of imports, way below the internationally recommended three months of imports.

This is also down from $502.98 million recorded as at January 31, representing 2.41 months of import cover.

However, the situation is expected to improve as sales of tobacco commence.

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