Malawi kwacha rallies against dollar

By Taonga Sabola:

The Malawi kwacha continued on its recovery path last week, appreciating against the dollar— moving from K774 to the green buck to K758.9 as at close of business Tuesday.

The development appears to have calmed the nerves of businesses who were expecting the worst early this month when the local trading unit sank to an all-time low of over K800 to the dollar.

Reserve Bank of Malawi (RBM) Director of Communication, Mbane Ngwira, Tuesday confirmed the kwacha was showing positive signs of recovery.

“We have adequate supplies of foreign exchange reserves and the tobacco market has picked up.

“We expect the market to have more forex. As we earlier said, there was front-loading of foreign payments. Now demand has reduced significantly,” Ngwira said.

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Last week, RBM Governor Dalitso Kabambe described the significant fall of the kwacha between May and June as a blip, saying the monetary authorities expect the local unit to stabilise in the short term.

Financial Dealers Association of Malawi (Fimda) President, Patricia Hamisi, said the recent appreciation of the kwacha to the dollar was a result of the reversal of underlying factors that caused the depreciation.

“We have seen reduced rejection rates from the tobacco floors from a high of 70 percent to now hovering around 25 percent which has, in turn, improved the flow of dollars from the tobacco market; hence addressing the challenge of supply.

“We have also seen that there has been Malawi kwacha liquidity in the market. This could be two-fold: The Central Bank has continuously worked on tightening the monetary policy to mop up liquidity in the market.

“At the same time, importers prepaid majority of their bills during the pre-election period and now have limited kwachas at their disposal,” Hamisi said.

Finance Minister, Joseph Mwanamvekha, recently indicated that the authorities were expecting the currency to settle at K750 to the dollar.