A report shows that the kwacha lost value against the United States dollar by nearly six percent in the first half of 2016.
The report, released by Nico Asset Managers, has attributed the fall to low tobacco prices and high rejection rates that have negatively affected the inflow of foreign currency. It also cites the strengthening of the dollar against other currencies as a contributing factor.
Economic analysts have predicted that the kwacha will continue to depreciate in the medium to long terms on account of existent current account deficits and weak foreign direct investment inflows.
“The exchange rate is expected to continue depreciating as a result of low inflow of foreign currency due to poor performance of the tobacco market, low levels of investment and persistent high inflation rate,” Nico said in the report.
Meanwhile, figures from the Reserve Bank of Malawi show that total foreign exchange reserves increased to $989 million, representing 4.73 months of import cover as at June 30 2016 from $900 million in May 2016.
Of the total reserves, $646 million, representing 3.09 months of import cover was gross official reserves while $343 million was private sector reserves.
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