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‘Malawi Kwacha to depreciate further’

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Felix Mlusu

Figures from the Economist Intelligence Unit, as quoted in the Nico Asset Managers economic report for November, have shown that the Kwacha is expected to depreciate further averaging K927 to a dollar.

According to the report, in November 2021, the Kwacha slightly depreciated against the United States Dollar but appreciated against the Euro, British Pound, and the South African Rand.

The local currency closed at K816.40 to a dollar from K815.50 recorded in the preceding month of October.

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The report, however, projects that the local currency will take a depreciation trend going forward and expected to be trading at K927 against the dollar by 2025.

“The rate of depreciation of the Kwacha is expected to moderate in the short to medium term. However, high demand for foreign exchange as the import bill rises, coupled with a weak export base, may continue to exert downward pressure on the kwacha, resulting in further depreciation beyond 2025,” the report reads.

The Kwacha depreciated for a good part of 2021 as a result of dwindling import cover which averaged below the recommended three months cover for the good part of the year.

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For example, by November 2021, import cover was seen at $389.26 million compared to $405.66 million in October.

Minister of Finance Felix Mlusu recently admitted that import cover has been problematic but was quick to point out that the government had employed strategies that would turn around the situation.

“If we do not export enough of what we produce, then we will, indeed, have problems with import cover. That is why we have placed strategies that should improve exports,” Mlusu said.

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