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| Business |
| Natbank warns on import cover |
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by
Ephraim Munthali, 27 May 2003
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17:59:47
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National Bank of Malawi (NB) said on Tuesday the fall in import cover to 1.83 months in March from 2.06 months in February this year is a bad signal to stability of the kwacha.
“The 1.83 months [of import cover] is not good enough. Unless the central bank has other expectations, this is not adequate because the minimum is three months,” said NB senior dealer Wilson Mlauzi.
“All things being equal, the kwacha may depreciate further. However, since we are in the tobacco season, the situation may improve.”
This year, it is expected that the country will realise US$175 million from tobacco proceeds which are expected to buoy the beleaguered kwacha.
But so far, the cash crop has failed to improve the exchange rate position despite government’s push to open the tobacco auction floors in March, a month before the traditional time of commencement.
Last week, the Monetary Policy Committee (MPC) of the Reserve Bank of Malawi (RBM) said the fall in import cover was due to external debt service and sales of foreign exchange to the domestic market.
But Mlauzi said the market has enough foreign exchange, adding that his bank, for example, did not buy much forex from the central bank over the last couple of months because it had enough.
He said the amount of forex reserves held by the national bank is what matters most in as far as impact on the kwacha is concerned.
The MPC said gross official reserves were, as at the end of March, standing at US$115.59 while Foreign Currency Denominated Account (FCDA) closed at US$57.93 million, up from US$55.39 in February.
The MPC said gross official reserves during the period under review stood at US$115.59 while Foreign Currency Denominated Account (FCDA) closed at US$57.93 million, up from US$55.39 million February.
The committed also said total forex reserves held by the banking system also fell slightly from 3.0 months of import cover in February to 2.94 in March.
The decrease in foreign reserves resulted in the kwacha trading at K91.5715 to the US$ by the end of March compared to K90.1509 a dollar in February.
“The kwacha was, however, expected to stabilise during the marketing season as the supply of foreign exchange improved,” said the MPC.
But about two weeks ago—already deep into the tobacco season—the kwacha slipped to K93 against the dollar and has since remained static around the same rate for close to a fortnight now.
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