The Malawi Kwacha hit an all-time low last week, trading at as high as K670 to the dollar as the local economy continues to sail through troubled waters.
A visit to the central business district of Malawi’s commercial capital, Blantyre, on Thursday revealed that foreign exchange bureaus were buying the dollar at around K630 and selling the green buck at rates as high as K670.
Ironically, the development comes at a time when monetary authorities continue to seat on healthy foreign exchange reserves of above three months of import cover.
In its November 2015, economic brief, investment management and advisory firm, Nico Asset Managers, said it expects the Kwacha to continue depreciating in the short term as the lean season continues.
Nico Asset Managers attributed the fall of the kwacha in recent weeks to a combination of a strengthening US dollar and the lean season, which has escalated demand for the currency.
Nico Asset Managers said the fall of the kwacha could be mitigated if authorities sell forex to the private sector.
With an anticipated bad growing season on the cards due to the effects of El Nino, authorities are less likely going to loosen their tight grip on the few dollars in the reserves as doing so could spell doom for the economy next year in the event of a bad tobacco season.
According to Nico Asset Managers, in the medium to long term, the kwacha is expected to depreciate due to the significant current account deficit and weak foreign direct investment inflows despite tobacco exports and improving forex reserves.
With Christmas just around the corner, a continued fall of the kwacha is likely going to spell doom for many Malawians as they will have to cough more kwacha to buy most commodities on the market.
And with schools opening in January, the falling kwacha is likely going to hurt students studying with international bodies as they will have to pay more in kwacha terms to meet the dollar or pound equivalent.
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