The Reserve Bank of Malawi (RBM) says despite the continued depreciation of the Malawi kwacha currency, it is comfortable with the level of foreign exchange stocks in the country both at the central bank and within the private sector.
Latest figures show that Malawi is currently sitting on about US$900 million in foreign exchange reserves, of which US$600 million is at RBM while US$300 million is with commercial banks.
RBM spokesperson, Mbane Ngwira in an interview on Monday, attributed the stability in forex reserves position to its stance of not supporting the exchange rate with foreign exchange sales.
“We don’t need the foreign exchange reserves to support the exchange rate movement as it is determined by demand and supply. It is this system which has enabled us to build the reserves,” said Ngwira.
He said the liberalised exchange rate policy has also helped in building the reserves, saying maintaining a fixed rate would have required the kwacha’s value to be supported with forex sales from the central bank.
Ngwira said the liberalised exchange rate has also reduced black market trading of foreign exchange in Malawi.
“If we have an exchange rate at a normal level, the black market normally collapses. So what we do is taking out the forex which would have been on the black market and put them in the reserves. So it helps in building the reserves,” he said.
Commenting on the outlook, Ngwira said it all depends on whether the country would not spend much on the maize imports and how earnings from tobacco will be.
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