The kwacha continues to lose ground against major trading currencies and has slipped further to K465 to a dollar in some foreign exchange bureaus and authorised dealer banks (ADBs), according to Reserve Bank of Malawi (RBM) daily forex figures.
Daily foreign exchange bureau rates published by RBM show that on January 3, the kwacha was selling at K465 to a dollar at CLC Foreign Exchange Bureau, which is a steep fall from K430 to dollar in early November last year.
To access a dollar at FDH Bank, Malawi Savings Bank (MSB) and Golden Forex Bureau in Lilongwe, among other places, one has to folk out K460 in local currency, according to RBM while at CDH Investment Bank, FMB and Golden Forex Bureau in Blantyre, a dollar is trading at K455, according to RBM published rates.
Spot-checks by Business News in Lilongwe on Monday revealed that on the parallel market or black market, a dollar is selling at K455 and buying at K465, indicating a steep fall in the value of the local unit which was selling at K330 mid-last year.
A Lilongwe-based banker yesterday predicted doom in the movement of the kwacha in the first half of 2014, [January to June], saying it is more likely that the local currency will continue ceding against other foreign currencies in view of prevailing economic environment.
“Right now, we have drifted into the lean season where demand for dollars is just too much and on the one hand we see donors still delaying to release their budget support.
“Summing up all these, I see the kwacha depreciating for the rest of the first half of this year,” said the banker who did not want to be named.
Consequently, a weak kwacha would continue to hurt importers as well as Malawian students who are obliged to pay their tuition and examination fees in foreign currency as they are forced to pay out more kwachas to meet their respective demands.
Malawi’s major donors under the Common Approach to Budget Support (Cabs) are withholding budget support for Malawi worth $150 million (over K60 billion) following the revelations of massive public funds abuse at Capital Hill popularly known as cashgate.
In the 201314 national budget, donors, who are an important source of foreign exchange, are providing 41 percent.
The other chunk of foreign exchange comes from tobacco, which wires in more than half of the country’s foreign exchange in a year.
Two weeks ago, RBM Governor Charles Chuka blamed the sharp depreciation of the kwacha largely on the loss of donor support which has constrained the central bank’s ability to defend the kwacha
But Finance Minister Maxwell Mkwezalamba in an interview with Business News in Lilongwe recently, blamed the massive depreciation on speculation on the market and not the shortage of foreign exchange on the market.