By Chimwemwe Mangazi:
The local unit, the Kwacha, lost value against major foreign currencies at an average 55 percent in the last quarter of 2023, figures from the Reserve Bank of Malawi (RBM) show.
A statement issued by the central bank at the end of its Monetary Policy Committee (MPC) meeting indicates the Telegraphic Transfer rate of the unit to a dollar stood at K1,697.98 per dollar on December 31 2023 after losing 50.7 percent during the fourth quarter of 2023.
This followed the 44 percent devaluation of the Kwacha exchange rate in November.
“Similarly, the Kwacha lost 57.5 percent against the British pound, 56.5 percent against the euro, and 55.2 percent against the South African rand.
“Meanwhile, the bureaux USD cash rate was at K1, 930.53 per US dollar, after losing 11.2 percent during the fourth quarter of 2023,” the statement reads.
Financial Market Dealers Association President Leslie Fatch said the reported movement is a result of the devaluation in an attempt to align the official rate to the parallel rate.
He said over time, it has been noticed that a number of auctions conducted by the central bank have not yielded any movement which suggests the alignment through the devaluation was a reflection of the market levels.
“For the Kwacha to appreciate, there is a need for a number of structural initiatives which, at this point, are not supported by the economic fundamentals in the short run.
“Until we address the structural issues and improve on the supply side of the currency equation, we should anticipate the Kwacha to either stabilise or lose further value.
He said current monetary initiatives by the central bank help to subdue the demand, hence the reduced pressure and stabilisation of the currency as has been witnessed recently.
In a separate interview, economist Francis Chanthunya said while the figures correspond with the market rate from official banks and bureaux cash rates, there is still scarcity in the cash forex market; so, forex is not readily available.
“As I see it, since there’s scarcity of forex and low volume of exports, there’s little chance of the Kwacha gaining statistically significant value against the dollar, euro and pound,” Chanthunya said.