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Reserve Bank of Malawi forecasts stable exchange rate in 2020

Dalitso Kabambe

The Reserve Bank of Malawi (RBM) has predicted continued stability of the Malawi kwacha on the exchange market in 2020 and beyond.

The central bank has based its projections on what it calls adequate foreign exchange reserves.

A monetary policy report released by RBM on Thursday, shows that gross official reserves rose to $846.6 million representing 4.05 months of imports in December 2019 from $656.0 million representing 3.14 months of imports in September 2019.

It further says foreign exchange reserves held by the private sector increased to $324.1 million representing 1.55 months of imports in December 2019 from $310.3 million representing 1.48 months of imports in September 2019.

In a recent interview, RBM Governor, Dalitso Kabambe, said the exchange rate has been stable for the past three years and is expected to continue.

“Although we had a blip shortly after the tripartite election in 2019, we managed to bring back the exchange rate to its level so we had a stable exchange rate throughout 2019 we expect the trend to continue in 2020,” Kabambe said.

In a response to an emailed questioner, Financial Market Dealers Association president, Patricia Hamisi, said the outlook is positive.

She said previously, exchange rate movement was largely affected by speculation.

“Importers would anticipate an acute shortage in the lean season and contribute to the depreciation through panic buying. On the other hand they would contribute to an appreciation in the tobacco season both of which are not favorable to the economy,” Hamisi said.

Hamisi then called for a tight monetary policy to control both which would entail an increase in bank rates.

Currently the kwacha is trading at K737 to a dollar and around K50 to the South Africa Rand.

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