By Taonga Sabola
Reserve Bank of Malawi (RBM) Governor Wilson Banda on Saturday challenged the country’s financial market dealers to work diligently by channelling scarce financial resources to productive sectors of the economy to enable growth.
Banda was speaking in Mangochi when he delivered a keynote address during the 2020 Financial Market Dealers Association (Fimda) Annual Conference under the theme ‘Financial Markets: Unleashing Malawi’s Potential Amidst Rising Negative Balance of Payment’.
Banda’s call comes as Malawi has imported goods worth $2 billion between January and September 2020 while exporting goods worth $500 million during the same time resulting in a trade deficit of $1.5 billion.
Banda told the dealers to expand their product offerings to support sectors that generate foreign exchange.
“Endeavour to finance industrialisation, not consumption, by focusing on export sectors such as agriculture and tourism development, just to mention a few.
“These sectors, and others that I have not mentioned, have potential to raise productivity and increase the country’s capacity to export as well as create employment,” Banda said.
He said the sharp decline of foreign exchange supply had put pressure on the country’s foreign exchange reserves. He said official reserves remain above the targeted floor of three months of import cover, allowing the central bank to intervene in the foreign exchange market and ensure availability of foreign exchange for importation of critical goods.
“Low supply of foreign exchange in the market, exacerbated by the impact of Covid-19, is also putting the Malawi Kwacha under pressure, since the third quarter. From the time the pandemic started, the local currency has lost about 2 percent of its value against the US dollar,” Banda said.
He, however, indicated that, overall, the financial system remained resilient and was coping with the adverse impact of the pandemic. Outgoing Fimda president, Patricia Hamisi said the dealers were committed to play their rightful role in ensuring that Malawi’s balance of payment position improves.
Hamisi described 2020 as full of surprises.
“However, the one bright thing that all this has revealed is how resilient our financial markets have become. Amidst all the chaos, we have seen the continued stability and right, facing direction of most of our macroeconomic parameters,” Hamisi said.