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Kwacha performance attracts mixed views

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Jim Kalua

Financial market experts have cast doubt on the footing of the local trading unit, the Kwacha, against major trading currencies, saying the current fundamentals do not support its stability.

Figures from the central bank show that, as at beginning of the week, the Kwacha was trading at K1,033 against the dollar, from an average of K1,035 in August.

The figures further show that on average, the local unit was trading at K58 to the South African Rand.

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The Kwacha remained stable at K1,068 against the Euro and only fell against the Pound, trading at an K1,180 from K1,149 in August on average.

But Financial Market Dealers Association (Fimda) feels the figures do not give a true reflection of the local unit’s performance.

Fimda Vice President Jim Kalua said despite the 25 percent devaluation in May, forex scarcity could have piled more pressure on the exchange rate.

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He said the country should work towards addressing the prevailing mismatched between forex demand and supply if it is to contain the pressure in the short to medium terms

“Let us find ways of exporting more and importing less and importation should only be for essential commodities which cannot be found locally,” he said.

Lately, the country has been faced with intermittent supply of fuel while importation of other essential commodities such as fertiliser is also facing glitches.

Fertiliser Association of Malawi spokesperson Mbawaka Phiri said in an interview that even at the official market, they are buying foreign exchange at a higher rate than K1,033 to a dollar.

“Importers are still struggling to source forex and if they do they are getting it at a higher rate. For example, the advertised rate is around K1,036 to a dollar while the real rate at which we are purchasing a dollar is K1,400,” she said.

Reserve Bank of Malawi Governor Wilson Banda maintained in a recent interview that devaluation has stabilised the Kwacha but was jumpy to mention if the local unit has reached equilibrium.

In May this year, the Reserve Bank of Malawi devalued the local unit by about 25 percent in an attempt to align it with the then trends and giving it its true value.

At the time, the Kwacha was trading at above K1,000 while official figures were quoting the Kwacha value at K850 to a dollar.

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