Chikaonda tips on forex management

Ex-Reserve Bank of Malawi (RBM) governor and former Finance Minister Professor Matthews Chikaonda has urged commercial banks in the country to prioritise on financing for essential imports as a way of sustaining foreign exchange availability during the lean season.

Chikaonda, who is also group chief executive officer for conglomerate Press Corporation Limited (PCL), believes the existing gross official reserves position at the Reserve Bank of Malawi (RBM) is enough to take the economy up to March next year.

“Banks should also play a part by not financing non-essential imports by critically looking at the CD forms. According to [Reserve Bank] governor, our gross official reserves are slightly over two and half months of import cover and obviously they [RBM] have to manage if we are not to lose such a position,” said Chikaonda.

The economy is consuming $188.1 million worth of foreign exchange per month, a revision from a monthly consumption of $129 million.

According to RBM statistics, the country is sitting on over $400 million, which accounts for over two and half months of import cover.

Chikaonda was speaking in an interview with

at Kamuzu Palace in Lilongwe after private sector players held a consultative meeting with President Joyce Banda.

His statement comes at a time when the economy is in its lean season where demand for foreign currency, notably the dollar, becomes excessive as importers scramble for the available foreign exchange to finance for their imports especially fertiliser.

The excessive demand for dollars has also put the exchange rate under pressure, as importers are accessing a dollar at over K450 in some foreign exchange bureaus, a steep depreciation from a K330 mark in June this year.

“Malawi economy had done very well and before April last year we had no forex, no fuel and most companies were beginning to close and capacity utilisation went down to 30 percent. Two months later we saw that capacity utilisation improved to 75 percent and that was a sign of system recovery,” said Chikaonda.

Commenting on the conglomerate, PLC, Chikaonda said the company has no immediate plans to close some of its People’s shops in the wake of improved economic situation.

Last year, Chikaonda announced to close 53 people’s shops, squeezed by the scarcity of foreign exchange and poor capacity utilisation, among others.

On Sunday, Finance Minister Maxwell Mkwezalamba, upon return from a mission in Europe, assured Malawians and the business community that although there have been delayed disbursements, the country should be okay in terms of foreign exchange position.

The minister also blamed the steep depreciation of the local currency in recent weeks on speculation on the market and not because of the shortage of foreign exchange on the market.