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Import cover worries Reserve Bank of Malawi

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The Reserve Bank of Malawi (RBM) has reiterated that economies easing up on Covid-19 restrictions may result in draining the country’s import cover and cause serious ramification to the economy.

Speaking on the sidelines of the launch of export enhancing strategies hosted by the Export Development Fund (EDF) in Blantyre recently, RBM Governor, Wilson Banda, said there is subdued demand for locally made products but increased appetite for imports especially medical equipment for fighting the pandemic.

Banda added that reduced earnings from the country’s main export, tobacco, has exacerbated the challenge.

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However, the Governor said currently the country has three months import cover which is being used cautiously.

“Short term, we are getting some lines, the IMF will give us some money, we are talking to the World Bank and other multilateral institutions so we will get some relief from them and long term we need to have a structural solution which will come from institutions like Export Development Fund (EDF),” Banda said.

Bankers Association of Malawi (BAM) President, Kwanele Ngwenya, added that the recent fresh presidential elections made foreign exchange business players to initiate a wait and see approach.

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“Whenever there is a change of government people have got a lot of things going on in their minds as far as where the rate is going to go but I think in the next weeks or so the market will stabilise,” Ngwenya said.

RBM statistics show that the Kwacha weakened in the month of August with the US dollar trading at K756 by August 31, 2020 compared to K749 per dollar on July 31.

This comes against a background of economies on the continent such as South Africa and across the globe are opening up boarders which were closed due to the Covid-19 pandemic.

In a recent interview economics professor at Chancellor College, Ben Kalua, said the country’s import cover was seen stable and sometimes growing because there were reduced imports due to Covid-19 restrictions.

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