Malawi kwacha remains stable
Two months after the end of the 2016 tobacco marketing season, the Malawi kwacha has remained stable against major trading currencies with the dollar hovering around K785 as of Friday.
The unit has not moved substantially since the beginning of the year when it was trading at almost the same rate against the US dollar.
However, the rate remains higher than was the case during same period last year.
Analysts attribute the current kwacha stability to reduced pressure following the end of the lean season.
Reserve Bank of Malawi Governor, Charles Chuka, said at the end of the fourth Monitory Policy Committee (MPC) meeting of 2016, that there was more room for the kwacha stabilisation following fiscal and monitory policy currently being implemented.
He reiterated that the central bank had taken “a second look” at the instruments used to manage the kwacha, thereby intensifying money market operations.
In an interview, Head of Economics at the Catholic University, Gilbert Kachamba, said stability of the unit emanates from improved policies coupled with a significant drop in level of imports.
“The situation is temporary; come the next few months, we may see some few changes in performance of the kwacha.
“Of course on the other hand we need to commend the Central Bank as between June and December 2016, the exchange rate has not been too volatile,” he said.
Kachamba then recommended a control over appetite for imports as a long term solution to the kwacha volatility and stable foreign currency reserves.
Last year, Malawi’s major forex earner, tobacco, performed poorly with revenues from the leaf totaled $ 276.39 million from the previous year’s $ 337.40 million, representing an 18 percent decrease.
This led to a substantial drop in foreign exchange reserves. Statistics from the Central Bank indicate that total foreign exchange reserves as at end December 2016 decreased to $ 943.54 million from $1,007 million on December 31, 2015.
Of the total reserves, $ 606.96 million was gross official reserves 2.90 months of import cover and $ 336.61 million was with the private sector reserves.
