The country’s Import cover dropped by approximately $50 million in November as compared to the preceding month of October 2020, an economic review from the Reserve Bank of Malawi (RBM) has indicated.
According to the review, gross official reserves stood at $573.8 million, which could cover 2.7 months of imports in November 2020, from $624.6 million which could cover 3.0 months of imports recorded in October 2020.
November sees the quest for imports increasing in Malawi due to Christmas and New Year festivities.
The drop in import cover may be attributed to the fall in the local currency which, according to the central bank, depreciated against all its trading partners except the Zambian Kwacha.
“The Malawi kwacha depreciated against most of its major trading partners’ currencies in November 2020 due to mounting foreign exchange demand pressures on the market. The weakening of the kwacha was partly attributed to new market optimism after Brexit deal was ratified, hence Pound Sterling and euro counters became strong,” reads the review in part.
The Kwacha lost 0.8 percent against the US dollar and traded at K765.92 per dollar as at end November 2020.
Likewise, the currency slipped by 4.6 percent and 3.6 percent against the British Pound and Euro, respectively, and traded at K1061.76 per pound and K958.34 per Euro.
Stakeholders have been advising policy makers in the country to put in place policies that will turn the economy from its seasonal economic calendar.
Economics Association of Malawi President Lauryn Nyasulu, for example, said as the country goes towards the end, it sees a dwindling export cover which emanates from a surge in purchases and other expenditures while exports become low.
“We can do better and this is where the issue of diversification of the economy comes in because we are very reliant on agriculture where we know that the only time we export much is after we harvest but we need to diverse and invest much in industries,” Nyasulu said.
Malawi is an agro-based economy highly reliant on exporting raw agricultural products with the main one being tobacco, which continues to face challenges.
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.