The Reserve Bank of Malawi (RBM) has said the Kwacha stood at K1, 749.51 to a dollar as at end June 2024 after gaining K0.87 during the second quarter of 2024.
This is contained in a Monetary Policy Committee (MPC) statement the central bank published last week.
According to the statement, the Kwacha stability was supported by improved supply of foreign exchange during the agricultural marketing season.
“The committee also noted that the spread between the Kwacha- US dollar TT exchange rate and bureaux cash exchange rate marginally widened to 11.1 percent as at the end of the second quarter of 2024,” the statement reads.
However, while agreeing that Malawi’s real exchange rate has appreciated since the start of 2024, the 19th edition of the Malawi Economic Monitor (MEM)—a biannual publication by the World Bank—notes that foreign-exchange liquidity has remained low.
It says that inflation in excess of 30 percent, coupled with a stable official exchange rate, has made it challenging to increase the supply of foreign exchange and that banks, exporters and investors continue to be reluctant to convert their foreign-exchange holdings into Kwacha.
“There are many factors that could explain this, including, on the supply side, uncertainty about being able to access foreign exchange holdings when needed as well as the higher rates offered in informal parallel markets.
“As a result, foreign-exchange liquidity among Malawian banks has been stagnant in recent months and foreign exchange sales to authorised dealer banks by the RBM since early 2023 have been unable to satisfy demand,” the report said.
In an interview, economist Marvin Banda said the foreign exchange market continues to experience both supply and demand constraints.
“These pressures will force rationing and the opportunity cost is usually felt in medicines imports which see shortages of drugs and other medical supplies as the trade-off government meets is painstaking,” Banda said.
0 Comments