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| Business |
| Kwacha depreciation heightens speculation |
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by
Frank Phiri, 17 March 2006
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04:59:28
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Stanbic Bank Malawi said on Wednesday exchange rate speculation has become rife on the market because of the daily loss in value of the kwacha against major trading currencies.
“Vividly, the daily devaluation of the kwacha continues to be of great concern to importers and traders because it continues to fuel speculation,” Bobby Otieno, Stanbic’s Head of Treasury said in a weekly market update.
He said against the US dollar, the kwacha has lost 38 tambala this week alone to trade at K134.51 per dollar.
Otieno said commercial banks are sitting on a backlog of import orders due to inadequate supply of foreign currency in the financial market.
News of the start of tobacco sales at the country’s auction floors—which was expected to dampen the speculation motive and keep the local currency steady—has not had the desired impact.
When in season, sales of tobacco—the major source of Malawi’s foreign exchange earnings—help to keep the local currency stable when in season.
Otieno said reports of higher quality and production of tobacco this year, and resumption of aid inflows should offer scope for midterm stability of the kwacha.
Minutes of the Monetary Policy Committee indicated on Monday that the country’s gross official reserves had declined to US$98.9 million or 1.5 months of import in February from US$119 million (1.8 months cover) in January.
Current forex reserves are below the three-months’ minimum, which should signal desperation for importers and joy for exporters, until such a time when this position improves. |
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