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Import cover hits 3.24 months in July

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Ben Kalua

Malawi’s gross foreign exchange reserves—a combination of official and private sector reserves— was seen above the internationally recommended three months worth of imports in July at $809.97 million.

This is, however, slightly lower than the $813.77 million recorded in the preceding month, representing 3.26 months, according to figures from the Reserve Bank of Malawi (RBM).

Since last year, the import cover has been hovering below the recommended three months of imports.

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In its latest Financial Market Report, advisory firm Nico Asset Managers says, despite the peak-up, the local unit, the Kwacha, depreciated against all major currencies, closing at K812.51 per dollar from K805.59 per dollar in June, representing a depreciation of 0.86 percent.

In an interview Tuesday, Chancellor College Economics Professor Ben Kalua said the outlook remains mixed and murky as the country enters an agriculture production season where demand for imports grows.

“We are heavily reliant on imports; therefore, external factors will continue affecting us such as the problems of supply some sectors have faced because of the riots which happened in South Africa,” he said.

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Another economist Laston Manja said the agricultural sector needs to be commercialised if its input to the national economy were to grow.

He further said, due to the inflow of the foreign currency, the Kwacha may stabilise but the situation may not improve that much.

“The Kwacha will remain volatile because we will now start importing agricultural products and individual household demand for the festive season,” Manja said.

Malawi is a predominately importing and consuming nation whose export base is highly dependent on raw agricultural products, with tobacco being the main export earner.

Most agricultural markets have closed, with the cotton market closing in July while the tobacco market closed last week.

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