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‘Reserve Bank of Malawi catching up with reality’

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Financial Market Dealers Association (Fimda) expert has rated as a sign of catching up with reality recent monetary policy positions taken by the Reserve Bank of Malawi (RBM).

Among other things, the central bank last week devalued the Kwacha by 25 percent, a move seen as an attempt to narrow the gap between the official exchange rate and that offered on the parallel market.

Fimda Vice President Jim Kalua said the measures employed by the RBM are aimed at aligning rates to what is on the ground.

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“The fact is that, currently, there is no injection; so, it’s difficult to measure actual results.

“But, in the longer term, I hope this will address problems as the Kwacha has been trading at a much lower rate,” Kalua said.

In a statement Monday, RBM said interventions in the foreign exchange market are made to support importation of strategic commodities.

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The press release also highlights that the central bank has initiated a temporary re-introduction of the mandatory sale of 30 percent of export proceeds.

“Going forward, authorities will continue to undertake a number of measures aimed at improving the foreign exchange supply situation in the market. The RBM will allow the exchange rate to adjust to a market clearing position with the view of endorsing a flexible exchange rate ‘managed float regime’ that allows the exchange rate developments to reflect market fundamentals.

“The government will continue to meet its financing needs from the market and continue to work on initiatives that are aimed at widening the export base through diversification of the exports to the mining sector, establishment of structured markets for exports to increase receipts through formal channels and implementation of policies that aim at improving the value of the exports,” the press release reads.

RBM Governor Wilson Banda, who signed the release, said the bank will aim to become a net buyer of foreign exchange in the market in order to increase official foreign reserves.

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