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Reserve Bank of Malawi speaks on Kwacha volatility

Wilson Banda

Reserve Bank of Malawi (RBM) Governor Wilson Banda has hinted that official rates pegging the dollar at K825 are only for telegraphic transfers (TT) but cash purchases of the foreign unit are close to the K1,000 rate being offered on the market.

This follows assertions making rounds on the market that the central bank has silently fixed the Kwacha to the dollar at K825.

The development is said to be inconveniencing business transactions where exporters are sourcing dollars at a higher price but earning less at point of payment.

“It depends on how they are getting the dollar either on TT rate or cash rate. K825 is the TT rate, you will find that our rates and those of the commercial banks do not vary much but when you bring in cash dollars you find that the gap is a little wider so the cash dollars are at around K1,000 but because these are different markets, the cash rates are usually more depreciated than the TT rates so don’t compare oranges and apples,” Banda said.

But businessperson and proprietor of Mpatsa Holdings Limited, Jimmy Korea Mpatsa alleged that the local unit might have been depreciated.

“If you walk to any bank today, I challenge you nobody will sell you the dollar at K825’ We are looking at K975 to K1,000 and even beyond that, which means that, for all intents and purposes the Kwacha has been depreciating and we are now trading at an average of K1,000 to a dollar.

“All these factors have gone to increase the cost of production. My worry is why the RBM is allowing financial institutions to be advertising rates that are not applicable in the commercial banks. The RBM must compel the banks to advertise the true exchange rates of the currency,” Mpatsa said.

In a recent interview, financial market analyst Cosmas Chingwe indicated that the figures being quoted in the market are not reflecting the situation in regard to performance of the Kwacha against its major trading partners.

Chigwe added that RBM figures are based on the formal market, where the Kwacha seems to be floating but has been fixed.

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