Malawi's forex reserves dwindling

Dollar

Banks and other foreign exchange traders in Malawi are rationing the amount of forex being given out to as reserves are dwindling.

One traveller said he asked for US$5,000 from his bank but was only allocated half the amount.

"I resorted to getting the rest from the black market where I bought the dollar [US] at MK900," he said.

According to Reserve Bank of Malawi figures, foreign exchange reserves 
continue to be lower than the pre-COVID-19 pandemic levels.

"Gross official reserves declined persistently in all the months of 2021Q1 [first quarter] and this contributed to the continued depreciation of the kwacha."

Official reserves fell to 1.96 months of import cover as of end-March 2021 from the 2.31 months registered at the end of February 2021.

RBM said the deterioration of the reserves was seasonal, but was exacerbated by the negative impact of the COVID-19 pandemic on domestic foreign exchange reserves accumulation.

By 16th April 2021, gross official reserves had declined further to US$394.28 million or 1.89 months of imports. Three months of import cover is the minimum desired threshold.

The Malawi currency, the Kwacha has been depreciated against the major trading currency, the US dollar. 

RBM's monitory public policy report published on May 7th indicated: "The Malawi kwacha marginally depreciated by 2.2 percent against the US dollar in the first quarter of 2021.

"However, in the period ahead, exchange rate pressures are expected to moderate, 
on account of the realisation of export proceeds during the agricultural marketing season," RBM Governor Wislon Banda said.

Malawi Revenue Authority figures for official currency trading put the US dollar at MK800.

On the black market however things are different as they are selling it around MK900 according to our spot checks.

Major currency trading

National Bank of Malawi pegged the US dollar at 801 at the close of business on May 7th.

NBM