Tobacco sales closure won’t hurt kwacha— Reserve Bank of Malawi

Post was last updated: September 3, 2019

The Reserve Bank of Malawi (RBM) has said it does not see the closure of the tobacco selling season hurting kwacha exchange rate stability.

Tobacco market regulator, the Tobacco Commission (TC) announced at the weekend that this year’s tobacco selling season is expected to close on September 18.

The kwacha has gained significant ground against major trading currencies in recent weeks, moving from an all-time low of K820 to the dollar in June to settle around K742 as of Monday.

RBM Director of Communication, Mbane Ngwira, Monday said Malawians need not to panic about the closure of the tobacco market.

“The market normally reacts to surprises. However, the closure of the tobacco marketing season has not come as a surprise. The amount raised from the sales was also expected.

“All in all, the impact of tobacco on the foreign exchange market was well known,” Ngwira said.

He added that the monetary authorities are praying for good results from the Extended Credit Facility programme review with the International Monetary Fund which starts in a week’s time.

“The outcome will see Malawi receiving a substantial amount of foreign exchange. Apart from other expected receipts, we expect the market to have more than adequate foreign exchange reserves,” Ngwira said.

As at Friday last week, Malawi’s gross official reserves were recorded at $765.82 million or 3.66 months of import cover up from $696.30 million or 3.33 months of import cover on May 31.

Financial Market Dealers Association President, Patricia Hamisi, recently said they expect the Central Bank to be intervening in the forex market where necessary to ensure a stable currency in the aftermath of tobacco sales..

“In the medium to long-term diversification and focus on boosting exports should see the economy making positive strides. Already, we have seen in the past week the implementation of such strategies through discussions and commitments made with Afreximbank which is looking to inject a total of $1.4 billion into Malawi to help diversify and increase our exports.

“Their investments seem to be largely focused on tourism and manufacturing which should help diversify from leaning heavily on agricultural exports. Of huge importance is following through these positive and much-needed strides,” Hamisi said.

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