Reserve Bank of Malawi (RBM) has said the current healthy foreign exchange position is a result of a tight monetary policy.
In recent months, Malawi’s gross official reserves—a combination of official and private sector reserves—have been increasing in subsequent months.
A recent RBM Financial Market Development report shows a continued increase in reserves during the week ending January 27 2017 compared to the previous week.
According to the report, as at February 2 2017, the gross official reserves stood at $604.86 million (K443 billion), which is equivalent to 2.89 months of import cover.
However, this is a drop from $629.4 million recorded during the week ending January 27 which is equivalent to 3.01 months of import cover.
RBM spokesperson Mbane Ngwira, in an interview on Monday, attributed the forex availability to the central bank’s implementation of a number of monetary interventions.
He said: “We have been building our reserves to a certain level say around three months or so. To achieve this, we set our target to have excess liquidity at zero because this is what brings about the demand for foreign exchange.
“We ensure that the kwacha is priced at a level where people opt for the kwacha. It is our hope that with policies in place, inflation will on the other hand continue to go down going forward.”
But Catholic University head of economics department Gilbert Kachamba noted that high tariffs on imports could be one contributing factors to the current forex availability.
“It could be that this has restricted the importation of non-essential items and this in turn has improved the forex reserves. It is my thinking that Malawians are becoming conscious of what to import which is not a bad thing,” he said.
Kachamba’s sentiments agreed with one crossborder trader, Easther Gondwe, who sells fashion accessories and clothes.
She said accessing foreign exchange is no longer an issue these days.