Private sector laments continued forex shortage
Malawi Confederation of Chambers of Commerce and Industry (MCCCI) has indicated that continued foreign exchange shortages are impinging on operations of the private sector that may greatly affect performance of the economy.
This follows revelations that one of the players in the manufacturing sector, Castel Malawi Limited, has halted production of some of its products due to the same.
In an interview, Thursday, MCCCI President Lekani Katandula said there has not been any improvement in foreign exchange supply, a situation that continues to affect its members.
Castel Malawi Human Resource and Corporate Affairs Director Gloria Zimba said the company is struggling due to foreign exchange shortage which have made it difficult for its suppliers to import key ingredients for the production of liquor.
She singled out hops and malt which are key ingredients in beer production.
“The situation is getting dire by each day and we need serious support to sustain our operations because we have enough money in our accounts to sustain our operations but they are in Kwachas and we need the dollars.
“We are still engaging the government through the Ministry of Finance and Economic Affairs, Reserve Bank of Malawi and the Ministry of Trade and Industry to bail us out. However, as long as the foreign exchange shortage persists, it will be very difficult for us to promise consistent supply of our products,” Zimba said.
Reserve Bank of Malawi (RBM) spokesperson Ralph Tseka said the country should expect improved foreign exchange supply soon on the back of the agricultural market, which is expected to be vibrant this year.
However, he was quick to point out that the problem requires collective efforts from all stakeholders to be addressed.
“RBM manages foreign exchange, which is already available, but generation of forex is mostly on the fiscal side. That is why every sector needs to play their part including the private sector itself,” Tseka said.
Foreign exchange shortage was named as one of the top challenges that affected the private sector alongside effects of Covid and energy woes in MCCCI’s Assessment of Business Environment 2022 report.
“Shortage of foreign exchange remains a major obstacle to the growth of domestic investment in Malawi. The country has been experiencing scarcity of foreign exchange during the year 2022 and it has been even worse compared to 2021.
“The problem is largely structural, emanating from imbalances between the country’s limited capacities in generating foreign exchange against insatiable appetite for imports. The supply-demand imbalance manifested in the domestic foreign exchange market in a number of ways, including low foreign exchange supply and declining official foreign reserves,” the report reads.
An annual economic performance report from financial advisory firm, Bridgepath Capital, indicates that, as at December 31 2022, the country’s gross official forex reserves decreased by 29 percent year-on-year to $304.65 million from $429.17 million recorded on December 31 2021.
The report further says private sector foreign reserves decreased by 6 percent to $399.20 million as at December 31 2022 from $425.52 million the previous corresponding period.
“The total forex reserves import cover in December 2022 was 2.82 months from an import cover of 3.42 months in December 2021. In December 2022, the import cover was below the required threshold of 3 months,” the report reads.
Justin Mkweu is a fast growing reporter who currently works with Times Group on the business desk.
He is however flexible as he also writes about current affairs and national issues.
