Standard Bank warns of perpetual kwacha fall

Standard Bank Africa has warned that the local currency, the kwacha, may continuously depreciate against its major trading currencies if Malawi dilly-dallies to grow its exports which are way below the value of imports.

Goolam Ballim, Standard Bank Group chief economist and head of research, sounded the warning in Lilongwe yesterday during a Malawi Economic Forum 2015 organised by Standard Bank under the theme Navigating the Malawi Economy.

Ballim (R) with Standard Bank Malawi head of global markets Lesego Osman during the forum on Wednesday
Ballim (R) with Standard Bank Malawi head of global markets Lesego Osman during the forum on Wednesday

He observed that the gap between imports and exports in Malawi is currently estimated in excess of $1.5 billion, one of the world’s highest trade gaps.

Said Ballim: “Malawi critically needs to enhance its exports because the gap between imports and exports is quite wide. Over time, the kwacha will perpetually depreciate.”

His sentiments come at a time the local currency has, over the past three weeks, registered a steep depreciation, especially against the United States dollar.

The currency, as of yesterday, was selling at K525 to a unit of the dollar in some foreign exchange bureaus, according to the Reserve Bank of Malawi (RBM) published daily foreign exchange bureau rates.

Some authorised dealer banks (ADBs) were selling a dollar at K480 yesterday from around K440 a few weeks ago.

But Ballim tipped authorities not to concentrate just on currency preservation, but also ensure on aggressive implementation of the National Export Strategy (NES).

“NES needs to be applied or implemented with sheer urgency. China and Turkey have enhanced production of goods and generally enhance income and employment creation, and so Malawi can also do it,” he said in an interview after his presentation.

As a long-term strategy, he said Malawi needs to make construction, services and financial sectors robust, adding that the country needs to nurture and harness agro-processing and value-addition.

On his part, Standard Bank of Malawi chief executive officer Andrew Mashanda said Malawi has a huge potential to grow as it is a peaceful country apart from having ‘demographic dividends.’

The forum came barely three weeks after the country hosted the first Malawi Investment Forum in Lilongwe to woo investment to diversify the economy.

Malawi’s economy is predominantly agro-based with tobacco as the major crop accounting for at least 60 percent of total foreign exchange earnings.

The kwacha’s depreciating is happening when tobacco dollars are flowing into the economy. During the lean period for forex, the kwacha stood its ground.

 

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