Tama, TCC cry foul on exchange rate
The Tobacco Association of Malawi (Tama) and the Tobacco Control Commission (TCC) have separately lodged complaints to the Reserve Bank of Malawi (RBM) and other relevant authorities over exchange rate movement during tobacco marketing seasons.
The oldest tobacco association in the country and the tobacco industry regulator said they are are puzzled by a recurring trend annually of an appreciating local currency at the start of the marketing season followed by a depreciating kwacha as the season ends which then disadvantages growers as they lose out revenue.
The complaint was lodged during a monetary and exchange rate symposium at Nkopola Lodge in Mangochi on Friday organised by the RBM aimed at discussing the conduct of monetary policy and the evolution of exchange rate policies in Malawi.
“Basically, as tobacco farmers we have an issue with the exchange rate policy regime that the country is practicing at the moment. In our perspective as growers, if you look at the movement of the currencyduring the time of the [tobacco] marketing, you find that the kwacha does appreciate and hence the farmer earns less because we sell in dollars,” lamented Tama chief executive officer Graham Kunimba.
Kunimba added: “On one hand when the market closes, immediately when the market has closed, you find now that the kwacha is depreciating at a faster rate and that is the time we go out to the field to start now producing the leaf and the process of producing, obviously you have to go out to the market and acquire agriculture inputs. And at that time, you find that the cost of inputs have actually gone up in response to the depreciating kwacha.”
The country is practicing a managed floating exchange rate regime which is mostly determined by a free interplay between demand and supply of foreign exchange, but with interventions by the central bank.
Kunimba said tobacco growers put much money into tobacco production process but said in most cases such an investment less than what growers get during the selling season due exchange volatilities ‘eventually making our business unsustainable.’
“We have noted that the managed exchange rate regime has got the positives as well as the negatives and the free floating has also got the positives as well as the negatives, so our question is that isn’t there a hybrid concoction of the two regimes looking at the positives of the two and come up with an exchange rate policy which will benefit all of us,” he reasoned.
The Tama boss said the exchange rate policy is meant to benefit not just one sector of the economy but also other sectors and every Malawian as a whole.
On one hand, TCC chief executive officer Bruce Munthali supported Kunimba’s worries, saying the exchange rate swings have greatly impacted tobacco growers before especially when the kwacha appreciates at the start of the selling season.
“The central bank and all other banks must do their part in the interest of tobacco growers because farmers are losing out,” Munthali said.
Munthali said it was imperative to be mindful of the fact that Malawi is an agro-based economy with tobacco being at the center-stage of anchoring the economy through higher export earnings and employment, among other benefits to the economy.
RBM spokesperson Mbane Ngwira could not pick up the call yesterday when Business News sought his reaction on the complaints by the tobacco industry players but his boss, Charles Chuka said in Mangochi on Friday that the bank is happy with the prevailing exchange rate as it reflects the true balance between supply and demand for foreign exchange the county has accumulated.
