Cisanet fears for weakening kwacha

Civil Society Agricultural Network (Cisanet) says the continued depreciation of the kwacha against the US dollar will negatively affect the country’s food production due to its overreliance on imported fertilisers.

In a statement made available to Business News, Cisanet board chairperson Herbert Chagona said with the onset of the growing season, the weakened kwacha and the current forex shortage continue to threaten the country’s food, fuel and fertiliser availability.

He said: “This, coupled with the country’s reported dwindling import cover in forex reserves, go hand-in-hand signalling the beginning of yet another cycle of hunger.

“For instance, scarcity of forex and intermittent fuel supplies may lead to government not affording to import fertilisers for its Affordable Inputs Programme (AIP) whose beneficiaries form almost half of those facing acute foot shortages in the latest IPC analysis. Also, commercial farmers and other households who are not part of AIP beneficiaries will not access the fertilisers in time; let alone access any at all.”

Last week, Reserve Bank of Malawi (RBM) announced a 2.8 percent depreciation of the kwacha after conducting the third foreign exchange auction, with the local unit now trading at K1 126 from K1 095 against the dollar.

In July, the kwacha fell by three percent while in June, it depreciated by 2.6 percent.

Meanwhile, the foreign exchange shortage remains acute with RBM data showing that gross official reserves decreased to $674 million or 2.7 months of import cover in July from $729 million equivalent to around 2.95 months of import cover.

Last week, Fertiliser Association of Malawi said it needs over $475 million (K520 billion) to settle AIP arrears and to cover future orders for both cash sales and supply for the 2023/24 season.

The association’s executive administrator Mbawaka Phiri said $130 million (140 billion) is for AIP arrears for the 2021/22 and 2022/23 farming season.

She indicated that as at August 2023, the association had a stock position of 391 000 metric tonnes (MT) of fertiliser for the 2023/24 farming season, much of which is held up for non-payment, which is subject to forex availability.

Said Phiri: “We have had discussions with the government and other stakeholders and we are trying to find solutions collectively.

 “However, companies have not been able to access forex for some time in required quantities from commercial banks. For Malawi, we have to remember that last year, because imports were low, we have very little carry-over stock.”

Data shows that Malawi’s annual fertiliser demand is between 450 000 and 500 000MT, with some informally exported to Zambia, Mozambique and Zimbabwe.

In 2022, for instance, about 7 000MT was exported, the centre’s data shows.