Official gross reserves remain below the recommended three months as seen at 2.20 months as at September 17 this year, a development which may continue exerting pressure on the Kwacha.
Gross reserves are foreign exchange which Malawi can use to import products.
According to a weekly market analysis report from the Reserve Bank of Malawi (RBM), as at September 17, gross official reserves were at $549.2 million from $587.6 (2.38 months of imports) on September 10.
Import cover has been struggling below three months for the good part of this year until August when it rose above the recommended period which experts attributed to seasonality of the economy as the agricultural marketing season was at its peak.
“The Kwacha remains broadly stable losing 0.11 percent in process to close the review week at K820.3 percent per dollar. However, the Kwacha gained against the British Pound, the Euro, and the South African Rand,” the report reads.
Financial Market Dealers President Mclewen Sikwese said the country should expect the import cover to still be below three months due to continued imbalance between foreign exchange demand and supply in the economy.
He said the incoming fertiliser season and ongoing Affordable Inputs Programme will also exert pressure on the limited foreign exchange resources, thus straining the reserves position further.
Sikwese said the rebasing of the monthly requirement from $209 million to $250 million means, in nominal terms, the country needs to raise $306.75 million to attain three-month import cover relative to $183.75 million at the historical monthly requirement of $209 million and the proceeds of the tobacco season will not be enough to plug the hole.
Justin Mkweu is a fast growing reporter who currently works with Times Group on the business desk.
He is however flexible as he also writes about current affairs and national issues.