Malawi’s trading unit, the Kwacha, depreciated by 4.6 percent against the United States Dollar in the first six months of 2021 as the current account deficit continued to widen resulting in lower forex reserves, portfolio management and advisory firm Nico Asset Managers has said.
In its mid-year economic report for 2021, Nico Asset Managers says the Kwacha moved from K770.84 to the dollar in December 2020 to K805.59 to a dollar in June 2021.
The firm has since warned that a large current-account deficit will continue to exert downward pressure on the Kwacha throughout 2021.
Nico Asset Managers was, however, quick to note that the pace of currency depreciation will be moderated by increasing foreign investment inflows and export earnings from the agricultural sector.
“The depreciation of the Kwacha is expected to moderate in the short run. However, high demand for foreign exchange, as the import bill rises, may continue to exert pressure on the Kwacha, resulting in further depreciation,” the report reads.
In its half-year financial statement for 2021, Malawi Stock Exchange-listed FDH Bank has predicted that the Kwacha/Dollar exchange rate would average K845 per dollar in 2021.
FDH Bank has further projected Malawi’s gross domestic product (GDP) growth to average between 1.5 percent and 2 percent in 2021.
As of Friday, foreign exchange bureaux were selling the dollar at an average price of K940 to the green buck.
Cross-border Traders Association President Esther Tchukambiri Sunday admitted that the fall in the value of the Kwacha was hurting businesses.
“It has affected us a lot. We are not making profits at all. Even if you raise the price no one can buy.
“The government must look into this problem seriously. They must safeguard our currency. About 80 percent of the traders are women and most of them are single parents. They are paying school fees, raising orphans. So, things are not working,” Tchukambiri said.
In his 2021/22 Budget Statement, Finance Minister Felix Mlusu projected that the exchange rate would remain stable at about K780 to the green buck.