Mwanamvekha says Kwacha on free fall: K900 for US$1 on black market

Democratic Progressive Party (DPP) spokesperson on finance Joseph Mwanamvekha says the government’s estimation of a stable exchange rate is a mere wish as the black market Kwacha to United States Dollar rate is already at K900.

He was speaking in Parliament on Monday when he presented the DPP’S response to the K2.2 trillion national budget.

Mwanamvekha who is a former Minister of Finance said the assumption which has been unrealistically estimated in this Budget is the stability in the exchange rate.

He said the Malawi Kwacha bureau rate against a dollar has increased from K765 in June to K810 in September 2020, and the black market rate has increased from K750 to K 900 in September 2020.

“Already, the kwacha is on a free fall as we speak and businesses are struggling to access foreign exchange to import necessary raw materials for their businesses and some of them have scaled down their operations as a result of this challenge.

“We all know that at a mere US$173 million for tobacco exports this year, export proceeds for all our commodities have slumped while imports have remained elevated, partly due to the inelastic nature of demand for strategic imports such as, petroleum products, fertilizers and medicines: as well as importation of essential imports for responding to Covid-19 such as testing kits which have worsened the country’s trade balance,” said Mwanamvekha.

He added that with the challenge of Covid- 19, not many donors will come forward to rescue Malawi with significant amounts of aid just as less revenues will come through diaspora remittances, foreign direct investment and tourism revenues.

According the former minister, the consequences for all these is that Malawi will likely end with a huge negative balance of payments this year which will exert enormous pressure on the kwacha.

“Other countries such as South Africa, Angola and others have already experienced significant movements in their exchange rate, hence, our estimation of a stable exchange rate is but a mere wish,” said Mwanamvekha.

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