RBM sells k6.7bn forex to commercial banks
The Reserve Bank of Malawi (RBM) sold about K6.7 billion worth of foreign exchange to banks to ensure that critical goods and services are not disrupted during the lean period, as indicated by available data.
The data provided by RBM further show that the central bank also injected K18.5 billion on November 7 while between November 12 and November 21 RBM sold a total of about K6.7 billion in foreign exchange into the banking system.
In a telephone interview on Thursday, RBM spokesperson Mbane Ngwira noted that the central bank has been selling foreign exchange to support critical areas including the aviation industry, medicines and fuel.
However, further explaining the transactions, Ngwira noted that the K18.5 billion which is shown as a foreign exchange purchase was a realignment of the market to give a proper reflection of the economy arguing there was also another transaction on the same day to offset it.
“The transaction does not mean that we bought forex from the market, but rather we were realigning the economy to give a true reflection of the forex exchange reserves which include official and private sector. The other transactions however were foreign exchange sales because we have to support certain critical transactions,” said Ngwira.
During the period, both official gross reserves and private sector reserves have increased. Official gross reserves rose from an equivalent of 2.07 months on October 31 to 2.18 months on October 27.
Private sector reserves have also shot up from $306 million (about K129 billion) to $348 million (K146 billion)in the same period. However, regardless of the increase in the foreign exchange reserves the kwacha tumbled to K430 to a dollar.
According to RBM data, the interbank lending rate—the rate at which banks lend money to each other to cover liquidity shortfalls—dropped from 25 percent on November 1 to 23 percent on November 27.
Commenting on whether the foreign exchange transactions have an impact on the market liquidity and hence the interbank lending rate, Ngwira said the changes are due to the market dynamics.
He said the current decline in the rate cannot be attributed to the central bank’s interventions.
Recently, in the wake of donor aid freeze, the RBM noted that it would tighten further the monetary policy through the use of open market operations, bank rate, and foreign exchange operations.n
