Kwacha strength scares Kasungu tobacco farmers
The continued appreciation of the kwacha against other currencies, especially the US dollar, has sparked discontent among tobacco growers in Kasungu.
In random interviews at Chinkhoma Auction Floors in the district on Thursday, the farmers complained that the local currency’s gain in value is ill-timed, coming at a time most of the tobacco has not been sold on the market with only nine weeks into the marketing season.
“I have sold 12 bales already and I was satisfied with the exchange rate at which my tobacco was bought and this was around K405 to a dollar, but I am shocked that as of today the same dollar is trading at K360 at one of my banks,” said Maliko Kayembe, a grower from Kadifula Village, Traditional Authority Chilowamatambe.
This means that if Kayembe were to sell his tobacco today, he would have had roughly 11 percent less in kwacha terms.
Another grower, Yamikani Chilizani, also queried the sudden change in the movement of the kwacha, saying it is a big blow to farmers, especially those that have not yet sold their tobacco.
“Unless government and whoever is involved in determining the movement of the kwacha intervenes now, we are going to lose out huge sums of money,” he said.
The kwacha has in recent weeks gained strength against international currencies, selling at around K390 to a dollar in most authorised dealer banks, according to published exchange rates by selected commercial banks last week.
The kwacha peaked to a K420 mark to a dollar for almost a month, a situation that sparked joy among tobacco growers since their market is dollar-based.
So far, about 40 million kilogrammes of tobacco have been sold, out of 156 million kilogrammes of output.
Analysts have also cautioned that the kwacha appreciation could frustrate exporters as they are bound to earn reduced earnings in local currency.
Reacting to the growers’ concerns, Tobacco Control Commission (TCC) chief executive officer Dr Bruce Munthali said the complaints were genuine, but advised them to opt for banks where the rates are relatively higher.
“However, on the one hand, the strength of the kwacha is a good sign in a way that it means increase in the purchasing power. Certain items that are so crucial in tobacco farming are imported, such as fertiliser and chemicals, and a strong kwacha means that these will be cheaper when we are importing them,” said Munthali.
Reserve Bank of Malawi (RBM) Governor Charles Chuka on Monday said the firming of the local currency and the recent slowing in the country’s headline inflation rate are signals that the central bank’s monetary policy is yielding results.
