Low tobacco prices may increase poverty
MAY/06/2009

The Malawi Savings Bank (MSB) has expressed fear that low tobacco prices buyers are offering in all the country's auction floors might perpetuate growers' poverty and suffering because a majority of them depend on the leaf for their livelihood. In its financial and economic report for April 2009, MSB notes that the low prices are a big concern for government and all players in the tobacco industry and the economy in general. "This Fthp low/ toharro prices] will also automatically translate into a slow build-up in the country's foreign exchange reserves and it could somewhat derail § overnment's eyelopment agenda," said the report. Since the opening of the tobacco marketing season on March 16 2009, tobacco prices have generally been below the government's set minimum prices for burleyat $2.15 (K3.01) and flue cured at $3.09 (about K432.60).

Reserve Bank of Malawi (RBM) Governor Victor Mbewe recently also expressed concern at the slow build-up of foreign currency due to the low tobacco prices currently prevailing. MSB said this year the build-up of reserves has been slow largely because of erratic sales and lower than expected prices on offer. The bank said at the end of April 2009, the foreign currency reserves had slightly picked up to $182.78 million (about K25.5 billion) from $182.04 million (K25.4 billion), in March. According to the sales report from the Tobacco Control Commission (TCC), as at April 24, 2009. the country had realised $10.6 million (about K1.4 billion) from the tobacco sales with 7.3 million kg sold at an average price of $1.45 (about K203). But MSB said indications are that the situation is set to improve because farmers have now started bringing to the floor good quality leaf. A visit to the Limbe Auction Floors last week showed that the prices have started to improve with the highest leaf fetching $2.95 (K413) compared to the previous weeks when the prices could not go beyond $2 (about K280).

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