By Joseph Dumbula
The Malawi Kwacha, the currency for the South African nation has weakened by three percent following a foreign exchange auction the Reserve Bank of Malawi (RBM).
This is the first drop of the kwacha since it was devalued by 44 percent last November, a development that sent shock waves in the economy, resulting in skyrocketing prices of goods and services.
Following the auction, the kwacha is now selling at a minimum price of MK1 751 against the dollar from MK1 700.
In a communication to authorized dealer banks dated March 19 2024 signed by RBM Governor Wilson Banda, the central bank said the forex auction in which four banks participated was successful.
Meanwhile, president Financial Market Dealers Association of Malawi Leslie Fatch has told the media that the development motions continued pressure on the Kwacha due to the backlog on import bills coupled with the limited foreign exchange supply.
The central bank recently announced plans to increase the frequency of foreign exchange auctions and permit intermediaries to trade at freely negotiated rates.
However, although the kwacha had remained largely stable at K1 700 following the November 2023 devaluation, resulting in the spread between the official and median bureau rates narrowed to six percent, the spread has started to widen and moving to over 17 percent since January this year.
In more recent years, it has been highly thought Malawi has been pressured by the IMF to devalue the kwacha, with the organisation believing it will stabilise the economy in the long run.
The economy has been undergoing turbulent times, characterized by an acute shortage of petrol and diesel, as well as high inflation.
