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Kwacha drops by 24% since January

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Betchani Tchereni

Local currency, the Kwacha, has depreciated by 24.7 percent since the beginning of this year to K1, 026.16 against the Dollar as at May end from K822 in January.

This is according to Bridgepath Capital Weekly Financial Market update for the week ending June 3 2022.

The report, however, says that week on week, the local unit has appreciated.

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“Week-on-week, the Malawi Kwacha marginally appreciated against the USD by 0.44 percent at K1,021.66 per US dollar as at 3 June 2022 from K1,026.16 per US Dollar as at 27 May 2022,” reads the report.

The Malawi kwacha has been on the losing ground since late last year, trading at over K1,000 against the dollar which forced the Reserve Bank of Malawi to implementa25 percent devaluation.

Reserve Bank Governor Wilson Banda announced that the devaluation aimed at giving the local unit its true value and that it should be in line with the current market trends.

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However, forex woes persist, raising fears of a dim outlook.

Minister of Finance Sosten Gwengwe has, however, said both the International Monitory Fund and the Reserve Bank of Malawi found out that the misalignment of the kwacha was at 25 percent.

He added that they would have chosen to devaluate the kwacha in portions but decided to devaluate the 25 percent to counter further depreciations and devaluations.

“We had a choice as government to do piece meals but that does not help because it simply fuels speculation therefore we had to do a decisive decision for once and for all,” he said.

Economist from the Malawi University of Business and Applied Sciences Betchani Tchereni said, currently, the hope for stabilisation of the Kwacha lies in getting confidence from the IMF.

He said apart from giving Malawi the much anticipated Extended Credit Facility, confidence from the IMF will help other donor partners to channel resources in dollar funding to the country, which will flood the market with dollars and stabilise the local currency.

Malawi’s currency is heavily vulnerable to external forces due to its over dependence on imports.

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