Malawi’s forex reserves improve to 1.3 months of import

Malawi’s gross official foreign exchange reserves position went up to $321.53 million or 1.29 months of import by the end of June 2023 from $194.82 million (0.78 months), NICO Asset Managers have disclosed.

This is according to a weekly market update the company published yesterday.

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Figures provided show that private sector reserves increased to $407.47 million, representing 1.63 months of import cover in June from $386.90 million, representing 1.55 months of import cover in May.

“Total forex reserves stood at $729.0 million (2.92 months of import cover) in June, an increase from $581.72 million (2.33 months of import cover) at the end of May 2023,” the update reads.

Economics lecturer at Malawi University of Business and Applied Sciences Betchani Tchereni said forex from tobacco might have helped in improving the situation.

He, however, reiterated the need for the country to consider diversifying the production base.

“In terms of sustainability, this is indeed the challenge before us because the import bill is still rising beyond $3 billion per year, which means this is just marginal but, for the short term, those austerity measures of forex must be put in place quickly,” Tchereni said.

Financial Market Dealers Association President Leslie Fatch said the improvement was expected due to good returns from the tobacco market.

He, however, added that while such progress gives confidence to the market, it can be overshadowed by the apparent huge demand for forex.

“The increased import cover works in the interim and we hope that there are sustainable efforts to maintain the growth in the long run,” Fatch said.

In an earlier interview, Reserve Bank of Malawi Governor Wilson Banda also expressed optimism that the tobacco market will stabilise the foreign exchange situation but was quick to say that the government was working on sustainability plans.