Firms paying huge premiums to access forex, says group

Firms paying huge premiums to access forex, says group

Post was last updated: February 7, 2023

The National Working Group on Trade Policy says companies are paying huge premiums to access foreign currency, particularly dollars, due to rising trade deficit.

The group’s chairperson Frederick Changaya said this in view of sentiments by the Reserve Bank of Malawi (RBM) on Thursday that exports could fall short of the financing demand for imports as the lean period approaches.

He said firms are paying a premium of over K450 per dollar, with the official exchange rate hovering around K1 036.

Changaya, who is also managing director of Applecore Grain and Milling Limited, said: “This position should worry all well-meaning Malawians into corrective actions.

“For government, it is trade and economic policies. For people, it is what we consume more and more.”

In its 2023 first Monetary Policy Committee Statement issued on Thursday, RBM Governor Wilson Banda said trade deficit could deteriorate until the opening of 2023 markets for major export commodities in the second quarter (April to June) 2023.

He said: “Supply of foreign exchange continued to be low during 2022 fourth quarter [October to December], leading to loss in value of the Malawi kwacha against currencies of the major trading partners.

“This development reflects the unfavourable performance in merchandise trade.”

Speaking in an interview on Friday, economist Edward Chilima said there is need to manage the import bill, which is dominated by huge fertiliser imports.

“There is need to review the whole fertiliser transactions,” he said. National Statistical Office data shows a deficit of $161.8 million (about K175 billion) was incurred during the last quarter of 2022 compared to a surplus of $18.7 million (about K19 billion) recorded during third quarter of 2022 (July to September).

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