Foreign exchange reserves upas kwacha slightly appreciates
Foreign exchange reserves have improved by $50 million (about K87 billion) in the second quarter of this year to $595.2 million (about K1 trillion).
The kwacha has since slightly appreciated against major trading currencies, according to the Reserve Bank of Malawi (RBM)
The improvement in forex reserves comes at a time tobacco sales are ongoing and have raked in $258 million (about K451 billion) so far.
According to RBM data contained in the Monthly Economic Review for April 2024, at $595.2 million, the reserves are equivalent to 2.4 months of import cover, which is still below the internationally recommended level three months import cover.
Reads the report in part: “The economy’s overall foreign exchange reserves position was recorded at $595.2 million or 2.4 months of imports at the end of April 2024, an improvement from $545.7 million (about K955 billion) or 2.2 months of imports.”
The report further said during the period under review, the kwacha appreciated against most currencies of the country’s major trading partners, except the South African rand.
In an interview on Monday, Economics Association of Malawi acting president Bertha Bangara Chikadza said the foreign reserves which been boosted by the proceeds from tobacco sales could ensure the resilience of the kwacha to external shocks.
She said: “This improvement in import cover is positive for the economy because it signifies an increase in foreign reserves which are necessary for the country to be able to purchase the necessary imports we need.
“If this continues, the positive buildup in the reserves can also build resilience in our currency against external shocks and this will mean inflation can also reduce. For the country to build on this, we need to be cautious on how much and what we import into the country.”
In a separate interview, Mzuzu University economist Christopher Mbukwa said the slight improvement in the import cover will offer slight relief to ensure importation of essential commodities such as fuel, fertiliser and medical drugs.
He said: “We need to build on this by developing other value chains that can sustainably bring in foreign exchange. We have viable value chains that can easily contribute to improved import cover.”
Forex critical for importation of essential goods such as fuel, fertiliser and medical drugs.
