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Import cover drops to $389.26 million

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Felix Mlusu

Malawi’s gross foreign exchange reserves —a combination of official and private sector reserves—continues to dwindle as seen at $389.26 million in November 2021, recent figures from the Reserve Bank of Malawi (RBM) show.

As quoted by the Nico Asset Managers Weekly Financial Market update the reserves are down from $405.66 million recorded in October.

This is a further decrease from $530.3 million (or 2.1 months of imports) posted in September.

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“The continued decline of the country’s foreign exchange reserves will continue to impair the central bank’s capacity to support the market with foreign exchange liquidity critical for a stable Kwacha. Furthermore, the situation is exacerbated by the lean season and the impact of the Covid pandemic,” the report reads.

This has bothered Financial Market Dealers Association which believes that the situation will worsen as the country enters the lean period between January and April.

Malawi, a landlocked country, remains a predominantly consuming and importing nation.

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The import bill mostly surges during the lean period as the country heavily imports agricultural production materials.

Economist from the Malawi University of Business and Applied Sciences Betchani Tchereni said the only solution in the short term is donor support.

In the long-run, the remedy remains improving the industrialisation drive and value-addition.

In an interview last week, Minister of Finance Felix Mlusu said the country was moving towards industrialisation as a medium to long-term solution.

“If we do not export enough of what we produce, then we will, indeed, have problems with import cover. That is why we have placed different strategies that should improve exports,” he said.

Recently, RBM Deputy Governor Grant Kabango urged authorised dealer banks in the country to be calm and avoid creating what he called undue speculation on the forex market which could incite exchange rate volatility.

He assured traders and commercial banks that the central bank was working towards addressing the foreign exchange problem in the country.

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