Advertisement
Business

Kwacha among Africa’s 2022 worst currencies

Advertisement
Wilson Banda

The World Bank has named the Kwacha among 2022’s worst performing currencies in Africa.

In its latest Africa’s Pulse report released on Tuesday, the bank says since the start of the year, the worst performing currencies in the region have been those of Ghana, South Sudan, Sudan, Malawi and the CFA Franc.

Africa’s Pulse is a bi-annual publication of the Office of the Chief Economist in the World Bank Africa Region. It analyses the short-term economic prospects for the continent and current development challenges.

Advertisement

According to the report, Ghana’s currency has depreciated by 60 percent since the start of the year while that of South Sudan has weakened by 50.8 percent.

Sudan’s currency is third with a depreciation of 28.6 percent. The Kwacha is fourth with a devaluation of 25.4 percent, and the CFA Franc is fifth with a depreciation of 13.3 percent.

The report says inflation in the region was trending upward before Russia’s invasion of Ukraine amid supply chain disruptions caused by restrictions to avoid escalation of Covid cases and the economic fallout from the pandemic.

Advertisement

“In addition, commodity prices, particularly food and oil prices, rose from a rebound in global demand, and oil prices rose from an Opec+ agreement to cut production. These effects were amplified by the war in Ukraine.

“Food and fuel prices as well as the depreciation of domestic currencies are the dominant factors underpinning inflationary pressures in the region,” the report says.

The Reserve Bank of Malawi (RBM) on May 27 devalued the local unit, the Kwacha, by 25 percent in what it described as a necessary step to align foreign exchange supply to the macroeconomic fundamentals as well as ensure supply in the formal market.

The devaluation saw the US dollar, which was trading at around K840, jumping to K1031.

However, despite the devaluation, pressure has not eased on the local unit with the dollar now trading around K1350 on the parallel market. This has left some sectors of the population speculating that devaluation could be on the cards.

In August this year, RBM Governor Wilson Banda expressed worry over persistent speculations and uninformed opinion about the future direction of the exchange rate.

Banda said the speculation was leading to market participants taking a wait-and-see approach to foreign exchange transactions, which is compounding the situation further.

“The RBM, therefore, wishes to inform the general public that it has no intention to devalue the Kwacha further in response to these speculations.

“We would like to further inform the general public that there are measures that the government is undertaking to address foreign exchange supply-demand imbalances,” Banda said.

Facebook Notice for EU! You need to login to view and post FB Comments!
Advertisement
Tags
Show More
Advertisement

Related Articles

Back to top button
Close

Adblock Detected

Please consider supporting us by disabling your ad blocker