Kwacha is still under control, says RBM Governor

Reserve Bank Governor, Charles Chuka , says the central bank has not lost grip of the exchange rate, claiming the central bank is still managing the Malawi kwacha.

His comments comes amidst a free fall of the local currency which has seen it depreciating from K167 to almost K400 to the USdollar over the past 10 months since the adoption of the liberalised exchange rate regime in May 2012.

Chuka told journalists in Lilongwe that the local currency has not been left to float that freely as is the case in other economies.

H e said RBM w as controlling it by managing its demand through a tight monetary policy ensuring that government was not competing with the private sector in the procurement of foreign exchange from commercial bank.

Chuka said the country’s essential imports were being paid for through the central bank.

“We don’t use the forex from the private sector to buy fertiliser or drugs. If we were doing, the kwacha could have weakened further than it is. That is one way of managing the exchange rate,” said Chuka.

He said the buying of excess liquidity from the market also controls the kwacha to make sure that it does not float wildly, saying the central bank retains the responsibility of ensuring exchange rate stability in the county.

Latest data indicates that official forex reserves remains at less than one month of import cover but Chuka remains optimistic that the situation would start improving with the start of the tobacco market.

An RBM statistics report shows that as of Friday last week, the central bank had US$175 million, which is 0.93 months cover while the private sector had US$211 million, a slight decline from US$217 million they had the previous week.

The country requires US$188.1 million official reserves per month to cover for essential imports but according to Chuka, the reserves available are after paying the bills.