Firm sees US tobacco ban hurting kwacha

Post was last updated: November 18, 2019

Portfolio management and advisory firm, Nico Asset Managers, has said it expects the recent Malawi tobacco ban by the United States (US) to hurting the strength of the local trading unit going forward.

The US last month announced a ban of tobacco imports from Malawi over child labour allegations.

In its October 2019 Economic Report released on Friday, Nico Asset Managers says the ban, if not resolved quickly, will also have a negative impact on the kwacha which will plunge it down further.

The Malawi kwacha has been stable for the last three consecutive months against the US Dollar.

However, it has registered marginal depreciation against the other major currencies.

The firm says the kwacha is also most likely to depreciate against the major currencies in the medium term due to the significant current account deficits and weak foreign direct investment inflows.

“A stable exchange rate makes the cost of imports predictable in the short-term. However, the depreciation of the kwacha in the medium-to long-term could lead to higher import costs and relatively cheap domestic exports on the international market,” the report.

US Embassy Acting Public Affairs Officer, Bryan Dwyer, told Times last week that the ban on Malawi tobacco may be revoked only if Washington is convinced that use of forced labour in Malawi has ceased

Dwyer said child labour is a significant human rights and governance issue and the Government of Malawi should urgently work with partners to eradicate child labor.

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