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Kwacha gains, albeit slightly in September

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Betchani Tchereni

Local unit, the Kwacha, which has been sailing through tough waters, in September gained momentum, albeit slightly, appreciating against all foreign currencies apart from the United States (US) dollar.

This is according to the September Monthly Economic Report issued last week by investment advisory and management firm, Nico Asset Managers.

According to the report, the Kwacha appreciated by 2.18 percent against the British Pound, trading at K1,096.27 from 1,120.69 in the preceding month and by 3.25 percent against the South African Rand, trading at K53.89 from K55.70 in August.

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The local currency also appreciated against the Euro by 1.58 percent, trading at K945.81 from K961.04 in August but it slightly depreciated against the US dollar by 0.37 percent, trading at K815.50 from K812.51in August.

The report shows that according to the Economic Intelligence Unit, the Kwacha will continue depreciating against the dollar and is expected to be trading at K829 to a dollar by the end of this year.

This, it says, is on account of a large current account deficit which will exert downward pressure but the depreciation will be moderate on account of increasing foreign investment inflows and export earnings from the agricultural sector.

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“High demand for foreign exchange, as the import bill rises, coupled with a weak export base, may continue to exert downward pressure on the Kwacha resulting in further depreciation beyond 2025,” the report reads.

Economist from the Malawi University of Business and Applied Sciences Betchani Tchereni said the Kwacha’s volatility is on account of mismatches between supply and demand where a few dollars are chasing more Kwachas.

Tchereni said, as a remedy, the country should work towards addressing the yawning gap between imports and exports as Malawi remains a predominantly importing and consuming nation.

“The other option is using derivatives where we can agree with whoever is going to sell the dollar to us that we are going to buy at a particular price should the price be not in favour of us,” he said.

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