RBM admits pressure to manage forex
Reserve Bank of Malawi (RBM) Governor Wilson Banda has admitted facing pressure to manage foreign exchange as supply and demand imbalances continue to escalate.
He said this in an interview on Friday in Mangochi on the sidelines of the Economics Association of Malawi (Ecama) Annual Economic Conference that the central bank is working on various modalities to ease the pressure in the short to medium-term.
Banda said the central bank is banking on inflows from development partners in the short-term and operationalisation of mega farms in the medium-term to bring in foreign exchange.
He said: “We are going through a difficult period. Our foreign currency inflows have been low this year. In particular, looking at tobacco, our main export earner, we realised less than $200 million [about K207 billion] in foreign currency.
“Out of these earnings, if you check our import bill for fuel, for instance, we are way too far.”
Banda said in the short-term, they are looking at interventions from development partners, adding that the Rapid Credit Facility by the International Monetary Fund (IMF) is the country’s hope in the short-term.
Malawi is expected to receive up to $88.3 million (about K91 billion), which is 50 percent of the country’s IMF quota in emergency financing through the new food shock window under the Rapid Credit Facility.
Banda said the bank is hoping that the injection along with others from the World Bank and African Development Bank, which the central bank is in talks with, should improve the inflow of forex in the short-term.
“We hope that this will take us to next year. From next year, we are hoping we will have a resumption of normal rains and season,” he said.
Banda sympathised with Malawians that the situation being experienced in terms of fuel is not a good sight, but an inconvenience to many people.
Speaking in an interview on Saturday, Malawi University of Business and Applied Sciences associate professor of economics Betchani Tchereni warned that an import cover below the recommended minimum of three months is potentially dangerous to the economy.
He said this could affect the country’s ability to import critical items and affect businesses.
Said Tchereni: “The current forex situation is not ideal. Such a situation continues to affect production.
“We encourage investment in productive sectors such as the mega farms project, cannabis production and mining as these will bring in the necessary forex in the country.”
RBM figures show that Malawi imports $3 billion (about K3.1 trillion) worth of goods and exports $1 billion (about K1 trillion) worth of goods, creating a $2 billion (about K2 trillion) trade gap and worsening the foregn exchange situation.
