Closure of most businesses during the festive season may have helped slow down demand for foreign exchange as both the central bank and commercial banks closed business on Thursday, December 31 with high foreign exchange stocks than the previous week.
The week also saw the import cover rising and continued to go above the 3 months internationally recommended benchmark for the second consecutive week in the month of December 2015.
According to a Financial Market Developments report of the Reserve Bank of Malawi (RBM) for the week ended January 1, 2016, gross official reserves significantly increased to US$639.04 million or 3.06 months of import cover as of December 29, 2015 from US$637.38 million or 3.05 months of imports by December 25 mainly following purchases from the market.
Before the beginning of the festive season on December 24, 2015, official foreign exchange reserves were recorded at US$605.67 million or 2.90 months of imports by December 18.
The trend was the same in the private sector where foreign exchange stocks started showing an increase by December 24 when total reserves of foreign exchange held by commercial banks went up to US$340 million on December 24 from US$330 million by December 18. The stocks in the private went further up by the close of business on December 31, 2015 when they stood at almost US$341 million.
During the period, however, the Malawi kwacha continued to depreciate, especially against the United States dollar and the British pound but appreciated against the South African rand.
As of Thursday December 31, 2015, the US dollar was at K672 from K670 the previous day, while the pound was at K996 on January 1 from K994 on December 31.
The rand, on the other hand, was selling at K43 on Friday January 1, from K44 on December 31.