Forex demand shrinks—MCCCI
The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) has said there is a general slowdown in the absorption of foreign exchange from the banking system by the business community.
The chamber has also said the local currency, the kwacha, is currently showing signs of stability, stressing that the currency stability is about to reach equilibrium.
MCCCI chief executive officer Chancellor Kaferapanjira gave this analysis on Monday when asked to provide the chamber’s perspective on foreign exchange availability, at the time the economy is absorbing the ‘painful’ economic reforms instituted by the Joyce Banda administration.
“Obviously, there is a slowdown in the uptake of forex by the business community. Demand for forex has gone down and is not as high as it used to be,” he said
Kaferapanjira noted that most businesses have scaled down orders of goods on account of a corresponding slowdown in the demand for goods by consumers.
He said that, recently, he personally toured shops in Blantyre and Lilongwe where it was apparent that demand for goods has been subdued, a situation that has affected most businesses.
“At first, demand for foreign exchange was just too high because of an accumulation of arrears in the system and this also resulted in the kwacha to massively depreciate against other foreign currencies,” he explained.
Kaferapanjira said, at the moment, supply for foreign exchange in the system is matching demand which, he said, has enabled the local currency to stabilise.
Reserve Bank of Malawi (RBM) Governor Charles Chuka, at the weekend, expressed optimism that the local unit will soon find its equilibrium.
Chuka recalled that at some point, the kwacha traded at over K400 to the dollar, but noted that the currency has appreciated to around K350 to dollar.
Malawi’s foreign reserves, as of June 2013, accumulated to $651 million (about K225 billion, at the current exchange rate) which was an equivalent of 3.5 months of import cover, according to the latest Monetary Policy Committee (MPC) minutes released last week.
Such an accumulation is an improvement because as at end April, foreign exchange reserves were reportedly at $398 million (K137 billion).
RBM said the accumulation in the foreign exchange reserves has benefited greatly from tobacco proceeds.
The country consumes $188.1 million (K65 billion) monthly such that the prevailing build-up in the foreign exchange will likely help the country, which has in the recent past been facing a critical foreign exchange shortage, to meet its critical import needs.
