Africa Economy: Malawians burderned as Kwacha sinks lower

The weak grip of the Malawi kwacha on the U.S. dollar is weighing heavily on Malawians who are expected to pay more for their daily needs during and after the festive season.

As at Tuesday, the kwacha was trading at 650 to the dollar but during the preceding week it hit what the local media described as an all-time low, trading at 670 to the dollar.

A spot-check to banks and exchange bureaus on Tuesday indicated that the dollar was bought at 634 and sold at 650.

The kwacha's performance is pushing prices of commodities and services up causing discomfort to Malawians, among them students studying with foreign institutions and paying their fees in foreign currency too.

An investment management and advisory firm named Nico Asset Managers, said in its November economic brief the kwacha would continue depreciating in the short term as the lean season continued.

The firm said the lean season had led to high demand for the U.S. dollar and that the dollar had also been strengthening hence the recent fall of the kwacha.

The firm envisioned that in the medium and long term, the kwacha was expected to depreciate due to the significant current account deficit and weak foreign direct investment inflows despite tobacco exports and improved forex reserves.

Malawi's government has repeatedly said it has managed to improve the country's import cover from one week, as it were in 2013, to three months.

The poor stand of the kwacha against the dollar comes on the background of the poor 2014/2015 agricultural production that has created high demand for maize, staple food for Malawi, and already creating room for price hike.

Already, the open market price of the much needed grain has gone as high as nearly 30 cents per kg against government's recommended price of about 17 cents per kg.

The government recently announced that it had procured 30,000 metric tons of maize from Zambia for government's designated farm produce selling agent, ADMARC (Agricultural Development and Marketing Corporation), and 22,193 metric tons of maize locally at a total cost of 8.5 million dollars.

"This maize will be used to stabilize the price of the commodity on the market through ADMARC," Vice President Saulos Chilima said at a press briefing, adding that the grain would be sold using rationing which means no one would be allowed to buy more than 25 kg at a go. Endit