The Kwacha will from today shed off 4.79 percent of its value following a forex auction held last week.
Reserve Bank of Malawi (RBM) Governor Wilson Banda said, in a statement on Friday, the local unit is expected to move from K1,126 per dollar to K1,180.29.
“Foreign exchange auctions are aimed at determining the prevailing market clearing price of the Malawi Kwacha against the United States Dollar and other major currencies.
“Based on the results of the auction, the new market selling price will be K1,180.29 per USD effective 2nd October 2023,” Banda said.
According to Banda, all the commercial banks participated in the auction.
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RBM has been conducting monthly forex auctions as a way of realigning the country’s trading unit.
On the parallel market, the dollar has been hovering around K1,800.
Briefing reporters in Lilongwe recently, Banda attributed the high price of the dollar on the parallel market to speculation.
This comes as RBM continues conducting foreign exchange auctions which, it believes, will help with the realisation of the true value of the local unit against its major trading partners.
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While agreeing with the notion that auction was a way of identifying the true value of the local currency last week, economist Edward Chilima wondered if the results of the auctions are a true reflection of the true value of the currency.
“The Kwacha will remain weak in the absence of exports that can improve the supply of foreign currency on the local market,” Chilima said.
Financial market analyst Bond Mtembezeka said despite the auctions that aim at realigning the Kwacha to other foreign currencies, the outlook is not promising as the country is fast approaching the lean period.
In May 2022, the Kwacha was devalued by 25 percent, a move was meant to align foreign exchange supply with the macroeconomic fundamentals, according to the central bank.
