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Wednesday, October 5, 2022

Malawi is facing a shortage of foreign exchange currency

Malawi is facing a severe foreign exchange currency crunch, forcing two international airlines to suspend some of their services to the country. The situation has negatively affected the operations of many more local and international cross-border businesses.

The latest monetary policy report from the Reserve Bank of Malawi indicates that the county’s official gross foreign exchange reserves stood at $374.48 million in the first quarter of this year, down from $429.17 million in the fourth quarter of the previous year.

The report also said that the foreign exchange reserves of the private sector also declined to $391.49 million this year from $425.52 million last year.

The situation has resulted in a severe shortage of foreign exchange in the market, forcing foreign traders to halt or suspend some of their operations in Malawi.

Muhammad Ghaffar, owner of ticketing agency Ghaffar Travels, and Ghaffar Airlines, which operates flights to Europe from Johannesburg, said the shortage had severely affected their business.

“We are unable to issue tickets from Malawi to other countries, but we are only issuing tickets from Malawi from our other offices, like we have our head office in the UK, we have an office in India, Pakistan and Turkey where we Issuing tickets for people traveling from Malawi,” he said. “We are losing a lot of business in Malawi until this forex issue is resolved.”

Last week, Ethiopian Airlines and Kenya Airways suspended their ticketing systems for local travel agents in Malawi due to lack of foreign exchange.

Ethiopian Airlines said in a statement that the move was taken because the Reserve Bank of Malawi has been unable to remit money to their accounts due to depleting foreign exchange reserves.

Therefore, passengers traveling from Malawi on these airlines will now have to buy their tickets from agents in other countries.

Officials say that government hospitals are facing shortage of medicines as the government cannot procure essential medicines.

Victoria Mwafulirwa, general secretary of Malawi’s Cross Border Traders Association. told a local radio station that the situation made their businesses uncomfortable.

“For example, as you might know, Malawi does not manufacture packaging material. It has to be imported,” she said. To import it, it must be paid in advance; To pay for this, foreign currency must be readily available, which is not the case at the moment. And so, you will see that it hinders progress and processes at every stage of operation of different sectors.”

Betchani Tcherenei, a lecturer in economics at Malawi’s University of Business and Applied Sciences, said the problem is largely due to the country’s failure to produce more products for export.

“This is because of our low export base, No. 1, and No. 2, the absence of donor support,” Tchereni said. “You will recall that the development partners, many of them, decided to exit the country and when that happened, it reduced the amount that is normally made available to the economy in terms of foreign exchange.”

The foreign exchange problem comes at a time when Malawi’s major export, tobacco, provides more than 60% of foreign exchange earnings.

Tcherny said there is little hope of making up for the decline in this year’s tobacco exports.

“Well, we are at the beginning of tobacco selling season, but the quantity is not that good; Not many people went into tobacco farming this year,” Tcherny said. “And you may also remember that the storm destroyed our tobacco and the produce of many other farms. So, that meant we couldn’t feel as much.”

Figures released this month by Auction Holdings Limited Group in Malawi show tobacco sales in the past five weeks have fallen by 78% compared to the same period last year.

Winford Masanjala, principal secretary of the Department of Economic Planning in Malawi, said the government was trying to address the foreign exchange shortage.

“A country needs to produce goods and services that it can sell to other countries,” he said. “At the moment Malawi’s desire and appetite for imports exceed its ability to export. So the government is saying in three years from next year that we need to restart some of the mines in Malawi so that we have alternative sources of foreign exchange. May be

The government says it expects foreign exchange reserves to start rising after the International Monetary Fund extends an extended credit facility to Malawi. The ECF provides financial assistance to countries with protracted payment problems. Negotiations for the ECF are expected to begin this Wednesday.

This article is republished from – Voa News – Read the – original article.

World Nation News Desk
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