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| Business |
| Forex reserves up to 2.7 months |
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by
Ephraim Munthali, 17 May 2004
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16:30:57
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Malawi’s gross international reserves rose to 2.7 months in March from 2.4 months in February, an economic report from Stanbic Bank said recently.
And in an interview Monday, Stanbic’s economic services manager Kondwani Mlilima said Reserve Bank of Malawi’s (RBM) forex reserves stood at 1.7 months of import cover while the remainder was with authorised dealer banks.
In February, central bank reserves stood at 1.36 months. “Tobacco receipts helped, though marginally, to boost the reserves,” said Mlilima.
Tobacco, whose sales started in February, accounts for more than 60 percent of Malawi’s foreign currency earnings.
Stanbic said in its March economic report that tobacco revenue sales take time to make a “meaningful impact” on the forex market.
The kwacha has over the past month remained stable against the US Dollar but appreciated against the British Pound, South African Rand and the Euro.
In its latest economic report, Stanbic said the kwacha exchanged at K108.80 per Dollar throughout April.
The bank said the kwacha appreciated by 3.6 percent, 8.8 percent and 2.5 percent against the Pound, Euro and Rand respectively.
Stanbic said the kwacha’s gains could be attributed to foreign exchange inflows from tobacco sales as evidenced by the RBM’s interest to buy dollars from the markets.
According to Stanbic, the central bank bought foreign exchange equivalent of K108 million on April 30 against K272.3 million it sold on April 1.
But Stanbic is worried that the present appreciation of the kwacha may be short-lived if donors remain undecided on the release of aid to Malawi.
“The failure by [IMF and World Bank] to renew commitment for financial assistance to Malawi will fuel existing economic problems,” said the bank.
High cost of borrowing, a volatile local currency, high money supply and sluggish growth of the real sector are the major problems hitting the economy, according to analysts.
The Bretton Woods institutions approved the resumption of aid to Malawi in the third quarter of 2003 but they have recently seemed unhappy with Malawi’s high public spending. The IMF has since postponed talks on aid.
Following the bodies’s indecisiveness, major bilateral donors who get signals from the IMF to give aid, have clung to their money.
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