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Mixed views on Kwacha footing

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Jim Kalua

The Reserve Bank of Malawi (RBM) has said the local unit, the Kwacha, showed signs of resilience against other main trading currencies in the first four months of the year, albeit losing grip in some instances.

Figures from the central bank show that the Kwacha averaged K822 in January and February against the United States Dollar and K823 in March and April.

Against the British Pound, the local unit traded at K1,211, K1,283, K1,214, and K1,150 in January, February, March and April, respectively.

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The figures, contained in the recent April 2020 Monthly Exchange Rate Report, also show that, against the Rand, the Kwacha was averaging K61, K64, K66 and K59 in January, February, March and April, respectively.

But on the parallel market, the unit was reportedly trading at K1,100 against the dollar from K800 as at late last year.

Local financial market analyst Cosmas Chingwe said in an interview yesterday that central bank figures were not reflecting the situation on the ground.

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However, Chigwe said the RBM figures were based on the formal market which he suspected that might have been fixed.

“Right now, the rate has almost been fixed by some of the measures which Reserve Bank of Malawi has put in place so that it controls the performance and it has been done in such a way that it should seem as if we have a floating market but it is fixed,” he said.

Malawi has been facing foreign exchange shortages since last year and figures from the central bank show that the country has for close to a year, has been having import cover at 1.50 months, which is half the recommended three months import cover.

RBM spokesperson Ralph Tseka was not immediately available for a comment after several attempts.

Financial Market Dealers Association of Malawi Vice President Jim Kalua said the RBM figures are correct on the formal market, but the Kwacha is trading differently on the ground.

“Right now, we need a huge injection so that the situation improves and the disparity is balanced while, at the same time, we should export more and make sure we import only that which is essential,” he said.

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