'Fuel shortages to continue due to forex woes'

fuel shortage

Fuel shortages in the Malawi are expected to continue as availability hinges on the country having foreign exchange.

The Reserve Bank of Malawi (RBM) has indicated the country will continue to experience forex woes in its June 2022 Financial Stability Report.

Governor of the Central Bank, Wilson Banda said: “looking ahead, domestic growth is projected to continue to experience downside risks emanating from rising inflation, foreign exchange shortage, and global supply chain disruptions due to the war in Ukraine and lockdown in China."

Foreign Exchange Reserves remained low standing at US$415.73 million as at end June 2022 representing a 3.13 percent declining  from US$429.17 million recorded as at end of December 2021. The decline in the first half of 2022 is a result of persistent high demand of foreign exchange against a declining supply side.

Gross official reserves
Source: RBM

Banda in the Stability Report explained that: "In terms of foreign exchange risk, the banking sector was low on foreign currency and so would benefit from devaluation.

“As at end June 2022, the sector reported a net long foreign currency position equivalent to K15.0 billion from K9.3 billion in December 2021, which meant a minimal impact on capital from movement in foreign exchange rates.”

The commercial banks and the Central Bank have been providing fuel importers with forex to facilitate purchase.

Petroleum Importers Limited (PIL) Martin Msimuko said currently they have seen a reduction in the amount of US dollars they are able to access from commercial bank for the importation of fuel.

Msimuko disclosed they need at least US$80 million (about K80 billion) to normalise fuel supply.

“Shortage of diesel is expected to continue as the product is on high demand world over,” Msimuko said.

Malawi University of Business and Applied Sciences (MUBAS) economics Professor Betchani Tchereni said time had come for the country to start doing thing differently but also blamed the institutional structure as being at the core of the problem.

Tchereni has on a number of occasions suggested reducing imports, reducing foreign trips by government officials and prudence in financial management.