Import cover rises to 2.14 months
Malawi’s official gross reserves rose by 18 percent within a week to about 2.14 months on June 5 from an equivalent of 1.82 months on May 29 indicate Reserve Bank of Malawi (RBM) Reports.
The RBM daily money market reports indicate that official gross reserves rose to $402 million on June 5 from a total of $343 million, a few notches from the recommended three months import cover.
The reports also indicate that private sector reserves in the period rose from $253 million on May 29 to $275 million on June 5.
The bolstering of the foreign exchange reserves mean that RBM will be able to support the kwacha against a possible plunge once the tobacco marketing season is over and when the demand for foreign exchange peaks during the importation of critical farm inputs such as fertilisers.
The boosting of the reserves also means that the country will be assured of critical imports such as fertilisers, fuel and medical drugs.
RBM, since the inception of the tobacco marketing season has been buying foreign exchange from the money market and hence injecting kwacha into circulation on account of liquidity crunch. Experts have explained that commercial banks currently have a higher affinity for the local unit against foreign exchange hence their readiness to buy kwacha from the central bank.
RBM has been implementing a tight monetary policy with the Reserve Requirement pegged at 15.5percent and base lending rate at 25 percent.
The kwacha has been appreciating recently from around K420 to the recent K350 to the dollar with experts attributing the gain to RBM tight monetary policy, the tobacco marketing season, and the current weak demand for foreign exchange.
