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The kwacha, which started weakening again this week after maintaining stability last month, will continue depreciating at a reduced pace until sometime mid this year, the Continental Discount House (CDH) said on Thursday.
“This will continue until the second quarter of 2003 after the opening of tobacco auction floors,” said CDH in an economic report for December.
On Monday, the unit came under renewed market pressures to K88.15 against the US dollar before from K87.9, before slipping further to K88.2 by Tuesday.
The exchange value on Thursday was K88.30 to the dollar.
The discount house attributed the movement of the unit to seasonal factors. Foreign exchange dealers said the pressure was coming from fresh demands for cash by the public, especially after the festive season.
The report said an improvement in the foreign reserves position from below three months import cover in recent months helped slow down the depreciation of the unit last month as the central bank was able to intervene by selling foreign exchange and stemming out speculation.
“The expected marginal depreciation of the Malawi Kwacha and increase in prices of local petroleum products following perceived increase in world oil prices may exert upward pressure on inflation,” said CDH.
The company said, however, a slowdown in the food price index could offset the pressure.
According to CDH, national inflation continued to go down to 12 percent in November from 12.9 and 15.4 percentages in October and September due to a slowdown in the prices of some commodities.
With the relative availability of food this year and government’s commitment to contain inflation, CDH said national inflation is expected to either stabilise or go down marginally.
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