Forex reserves still low
MAY/06/2009

The country's forex reserves are still very low at below 1.5 months of import cover despite the commencement of the tobacco sales season. According to a monthly Financial and Economic report by Malawi Savings Bank (MSB) for April, the reserves stood at around US$182.78 million during early April. "The country's foreign reserves showed some signs of stabilising in April 2009. After closing the month of March 2009 at US$182.04 million, the level of reserves marginally increased to US$182.78 million attributable to tobacco proceeds following the opening of the tobacco auction floors on 16th March 2009," reads part of the report. But MSB says the build up in the reserves this year has been very slow as a result of erratic sales of tobacco and lower than expected prices offered by buyers. "However there are indications that prices may start to improve as the selling season progresses as a result of the factors highlighted above.

This is a normal trend in that the type of the leaf offered during the start of the season is usually of low quality, which is the first to be harvested and offered for sale at the auction floors," MSB says. On the other hand minutes of the 75th meeting of the Monetary Policy Committee held in February at the Reserve Bank of Malawi in Lilongwe show that in January net foreign assets of the banking system rose by K12.3 billion as official reserves rose on account of significant inflows for balance of payments support grants and loan.

"Gross credit to private sector rose by K807.7 million mainly due to lending to the agriculture sector of K459.2 million and households of K328.8 million. "Net domestic assets are also expected to expand in the coming months largely from fiscal operations on account of expenditure related to the general election," the MFC said. The committee resolved to maintained the current tight monetary with the bank rate at 15 percent and the Liquidity Reserve Requirement remaining at 15.5 percent

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