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Kwacha still losing grip

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Ben Kalua

The Kwacha continues losing value against major trading partners since the beginning of the second half last year, latest figures from the Reserve Bank of Malawi (RBM) have revealed.

The local currency was trading at K781against the United States (US) Dollar in February 2021, compared to K776 in January.

The unit local currency was trading at K1,128 against the British Pound in February compared to K1,099 in January this year.

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In July last year, the currency was trading at K743 against the US Dollar, K952 against the British Pound and K45 against the Rand.

Commenting on the figures, Chancellor College Economics Professor Ben Kalua said this was expected because due Malawi’s dependence on imports against its narrow export base.

“Our exports base is very narrow and it is not being diversified. That is a recipe for trade deficit and we have been in such a situation for a long time. I do not expect the situation to change unless we lift our economy out of tobacco-dependence,” he said.

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Another economist from the Chancellor College Joseph Mazalale said the Covid pandemic has also affected the local currency’s footing on the market.

“The pandemic has dwarfed our already struggling manufacturing sector thereby dwindling exports and at the same time external support has reduced because donors are also solving their problems and that has affected our balance sheet because we do not have enough inflows,” Mazalale said.

Speaking when presenting the Mid-year Budget Statement to Parliament, Finance Minister Felix Mlusu admitted that the Kwacha faced pressure during a greater part of 2020.

From June 2020 to December 2020, the Kwacha depreciated by about 5.0 percent against the United States Dollar.

As at end December 2020, Gross Official Reserves stood at $574.3 million, representing 2.8 months of imports, down from $846.6 million (4.1 months of imports) recorded in December 2019.

The local economy is mostly susceptible to exogenous shocks as Malawi is a pre-dominantly consuming and importing nation.

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