The gap between Malawi’s official exchange rate and the parallel market has widened as black-market rates for the United States (US) dollar surged to K4,100 on Monday.
This highlights a K2, 350 spread between the current black-market rate and the official rate, which has remained stable at K1,750 to the US dollar.
It also reflects a 36.7 percent increase in just three weeks compared to the K3, 000 the dollar was fetching on the black market at the beginning of March.
This growing disparity highlights the severe foreign exchange shortages troubling the country despite recent interventions by the Reserve Bank of Malawi (RBM).
In an interview, Economics Association of Malawi President Bertha Chikadza said the widening spread was due to basic economic principles.
“The spread between the official and parallel market rates is a reflection of forex scarcity in the country. These are forces of demand and supply at work.
“That is why measures employed by RBM may work temporarily with the real solution lying in finding forex-generating avenues.
“However, with speculative forces in place, we expect that the new measures announced by the Governor [of the central bank] on Friday should bring the rate back to the bureau cash rate,” Chikadza said.
Economist Marvin Banda the tactics employed could not be sustained to secure the official rate of the US dollar without increasing productivity.
“The crackdown efforts are important to deter the black market. However, they do not replenish the official sector because the problem has always been supply side leakages.
“The spread is a speculative difference that is created by supply and demand of forex in both the official and unofficial markets,” Banda said.
Meanwhile, RBM has come hard on illegal forex trading in a move that is intended to eliminate the black market, unleashing a new wave of directives.
On Friday, RBM Governor Mac Donald Mafuta Mwale announced that the main aim was to kill the demand for forex on the black market which he, however, rated as complex and hard to deal with without sophisticated approaches and collaboration.
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