• December 5, 2022 1:17 am

Government to contain Forex shortage in the country

Jul 22, 2022

President Dr Lazarus Chakwera continue taking this country beyond the expectations of many.

Malawi has been experiencing frequent forex shortage since Democratic Progressive Party (DPP) era which was accompanied by heavy domestic and foreign borrowing.

After passing such a time, the Reserve Bank of Malawi (RBM), through its latest monetary policy report painted a very gloomy picture of the status of forex in the country.

The situation has negatively affected the operations of many local and international businesses. Some businesses even halted their operations.

The good news is that these forex challenges are likely to ease soon as Malawi is expected to raise funds amounting to $500 million, an equivalent of K513 billion, through loans and grants to be acquired from different partners for various projects.

According to RBM, the county’s official gross foreign exchange reserves in the first quarter of this year 2022 stood at $374.48 million, a drop from $429.17 million in the fourth quarter of 2021.

With the news broken by the Minister of Finance about injection of forex through grants and loans, most business operations are likely to normalise, domestic production for export will resume, so too importation of various goods including raw materials.

Malawi recently announced a 25% devaluation of its national currency, the kwacha, in a bid to shore up dwindling foreign exchange reserves and curb inflation.

The declaration was made as government launched recovery package talks with the International Monetary Fund (IMF).

The devaluation, the biggest in a decade, will take effect to normalise the Kwacha with a Dollar as reported by the Central Bank of Malawi.

The last devaluation of the kwacha (33%) was effected in 2012.

For six months, Malawi has seen its foreign currency reserves shrink sharply due, according to the Central Bank, to a drop in export revenues due to the Covid epidemic and a rise in the cost of imports, particularly raw materials, due to the war in Ukraine.

The country was also hit by two devastating cyclones in 2022.

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