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There are mixed reactions over the Malawi kwacha’s ability to survive against its major trading currencies with some foreign exchange dealers specualting that the local currency will slightly lose value owing to increased forex demand and others saying there is no cause for alarm.
A dealer with one of the banks in Blantyre said on Wednesday the kwacha will fall sooner or later because “we [dealers] will have a tough time to meet the demand.”
The dealer said already some dealers were pushing up the price for a US dollar to about K141 and K142 as the demand grows for the scarce foreign exchange.
But Dealers Association of Malawi (Deama) president Edward Chilima yesterday dismissed the speculators saying Malawi currently has enough import cover of about 2.9 months which, he said, is enough to cater for the demand of forex during this lean period.
“There is a shortage, but it is not critical. As you are aware this is a lean period [October to March] and as we go towards the tobacco season the shortage in forex is always expected but this year, there isn’t much pressure.
“This is a seasonal shortage and people should not panic as the reserves will soon pick up [as the tobacco selling season starts in Match]. It is not as critical as peculators on the market are putting it,” assured Chilima, who is also head operations at the financial securities firm First Discount House.
He, however, said it is expected that due to the high demand for forex the Malawi kwacha might lose its grip on K140 to a dollar by a small margin.
“Yes, the kwacha might depreciate a little bit but we are confident that later it will pick up,” he said.
For about over months the kwacha has been stable, trading at K140.
National Bank of Malawi (NBM) yesterday said the situation this year has improved compared to last year when the bank was forced to suspend forex trading during the lean period.
“The shortage was expected but we are still trading although we can not meet all the demand.
“We have substantial levels of reserves to meet some of the demand, this year the situation has rather improved compared to last year when we were in some cases forced to suspend trading,” said Harry Mukaka, NBM senior treasury manager.
He said following debt relief and improvements in macroeconomic performance of the country this year the shortage is not critical.
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