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Despite expectations from market players that the country’s currency would appreciate with the on-set of tobacco sales—the number one foreign exchange earner, the kwacha this week lost its grip to the US dollar and moved from K140 to K142 per greenbuck.
From December todate the kwacha has depreciated with about 0.8 percent.
Economic commentators have described the situation as normal considering that the kwacha has not moved much in the recent past.
Dealers Association of Malawi (Deama) president Lusekelo Kawoloka said yesterday one of the factors leading to the local unit’s depreciation is the continued high demand for forex on the money market.
She said despite a good start to this year’s tobacco selling season there was still a backlog of forex demand that has to be met.
“There was an accumulated demand for forex between October and March. During this period the market was grappling to fill the demand,” she said
Kawoloka also pointed out that another major player on the money market, the Reserve Bank of Malawi has maintained to keep money supply on the market under control, saying often in the first quarter the central bank injects forex into the market.
“Another factor is that there is a delayed effect, it will take a bit of time before the proceeds from tobacco sales will have an effect on the market,” she said.
Kawoloka however said the situation shows that the kwacha is stabilising and the prospects for future looked positive.
This development will be sweet music to the ears of the private sector who have all along complained that the kwacha was over-valued.
The Malawi Confederation of Chambers of Commerce and Industry is on record having said long term overvaluation of the kwacha would inhibit business from integrating into the global market.
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