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Reserve Bank of Malawi prays for calm over forex situation

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SHABA—We hope the central bank will continue supporting us

Reserve Bank of Malawi (RBM) Deputy Governor Grant Kabango has urged Authorised Dealer Banks (ADB) in the country to be calm and avoid creating what he called undue speculation on the forex market which could propel further exchange rate volatility.

He was speaking Monday in Mangochi at the opening of the Institute of Bankers (IoB) in Malawi annual lakeshore conference.

Kabango assured traders and commercial banks that the central bank was working towards addressing the foreign exchange situation in the country.

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“Currently, gross official reserves received a boost through Special Drawing Rights allocation amounting to $188.0 million from the International Monetary Fund in August 2021. This allocation increased the gross official reserves to $605.5 million which is 2.4 months of import cover,” he said.

But Kabango said, currently, Malawi is facing increased demand for forex, mostly emanating from importation for agricultural inputs, fuel, medicines, besides other traditional imports by government and the private sector.

“This is happening against the backdrop of a structurally constrained export receipts base, thereby naturally creating pressure on the Kwacha value over time. This notwithstanding, let me assure this gathering that the Reserve Bank of Malawi continues to manage this situation to ensure foreign exchange availability in the short term and the period ahead,” he said.

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Among other things, Kabango said Malawi has prioritised export diversification as one of the major elements to help address foreign exchange shortages on the market.

He acknowledged that, in the recent years, tobacco revenue has remained relatively low, and this has affected the forex situation.

This, he said, prompted the central bank to start buying gold from artisans as an additional source of forex for the country.

“We have the Export Development Fund (EDF) which was established by the Reserve Bank of Malawi. The EDF is promoting export-oriented activities which will generate foreign exchange. As an example, EDF is buying raw gold from artisanal miners, where it is processed before selling on the international market,” he said.

He said the central bank was optimistic that these efforts, among others, would soon be generating enough forex for the nation.

Kabango also said it was the wish of the central bank to see that commercial banks in the country were offering banking services to their clients at competitive but affordable prices.

He said there are about 70 percent of the population which is not banked because they are afraid of high banking services.

IoB Chairperson Zandile Shaba said the institute is happy that the central bank is addressing challenges which affect access to foreign reserves by commercial banks and traders.

Shaba said, of late, some banks have been struggling to serve their customers who engage in international trade due to inadequate foreign currency.

“We hope the central bank as a regulator will continue supporting us by providing policies that will facilitate the economic renaissance using commercial banks,” she said.

The conference was held under the theme ‘Leading Malawi’s Economic Renaissance, Focusing on the Malawi Agenda 2063’.

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