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| National |
| Forex shortage hits Malawi |
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by
Ephraim Munthali, 22 March 2005
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14:49:32
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An acute foreign currency shortage in Malawi has finally forced the kwacha to lose its 18-month stability against the US dollar and compelled some banks to suspend forex sales.
Leading forex bureaux in Blantyre were selling the US dollar at K125 after trading at around K109 for 18 months.
Other major trading currencies like the Euro, the British Pound and the South African Rand also closed harder.
The pound was fetching around K235 from K213 a couple of weeks ago, the Euro was at K165 from about K148 while the Rand was at K21.50 from around K18.20.
Stanbic Bank (Malawi) acting managing director William le Rouxe confirmed the break in forex sales which he attributed to the shortage.
“The message to our clients is that this situation should be seen as temporary. Once we get hold of forex we will trade,” said le Rouxe.
Insiders from other banks told The Nation that their institutions too have briefly stopped selling forex.
National Bank of Malawi (NBM) on Monday denied suspending sales. But the bank said they are “issuing what we are able to give” based on availability.
“Supply is not adequate and the demand is just too high,” said Harry Mukaka, National Bank senior treasury manager.
The Reserve Bank of Malawi (RBM) admitted that the forex situation is serious, especially now that the official import cover stands at 1.8 months just above half the three months minimum.
RBM deputy general manager Neil Nyirongo said the central bank is now relying on tobacco auctions which start next week and pinning its hope on donor goodwill to limit the short-term effects on the kwacha.
“This is a lean period (October to March) and fortunately the [current shortage] has started when we are about to sell tobacco,” said Nyirongo.
Tobacco—accounting for 60 percent of Malawi’s forex earnings—and foreign aid, have traditionally supported the kwacha.
Nyirongo said the central bank is doing all it can through market interventions to minimise further losses in the kwacha but said it cannot go beyond its mandate just to save the local market.
“After all, the Reserve Bank does not print dollars,” said Nyirongo.
The RBM has over the past 18 months maintained the kwacha at about K108.90 to the dollar through “consistent intervention”—selling forex into the market during shortages and buying when there is a surplus.
The present kwacha fall comes just a week after Stanbic Bank Group warned of the kwacha’s impending devaluation
“The risk of [kwacha’s] devaluation remains real as the current unofficial peg policy would be difficult to maintain if the dollar strengthens,” the group warned last week.
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