THE country's foreign exchange reserves have shot up by only six percent since the country devalued the kwacha on May 7, one of the country's financial institutions, CDH Investment Banks has said.
CDH says in its weekly economic report for last week that since the devaluation was effected, foreign exchange reserves held by both the Reserve Bank of Malawi(RBM) and commercial banks have marginally improved to US$319 million as at June 22.
The represents 2.46 months of
import cover, an improvement from 2.34 months as at May 4 when the country only had US$302 million in forex reserves.
Despite the improvement, CDH says the country's forex position is still not healthy enough.
"This figure is very low when compared to the required minimum import cover of three months," said CDH.
Government, through the Reserve Bank of Malawi devalued the kwacha by 49 percent from K168 per dollar to K250 per dollar in a desperate attempt to get back on track the then derailed Extended Credit Facility (ECF) programme with the IMF.
The devaluation was viewed by many as a necessary evil that would trigger a significant improvement in the country's forex levels.
Malawi late last month agreed a new US$157 million ECF programme with an IMF staff mission, subject to the Fund's board approval on July 23. The IMF has since issued a letter of comfort to Malawi's development partners that they may start pouring in budgetary support into Malawi in the absence of a programme, if they wish.
During a recent economic symposium held in Blantyre on the effects of the recent devaluation on the country's exports, experts provided recommendations on what should be done going forward, according to CDH.
"Some of the internal supply side issues recommended for redress include power infrastructure, irrigation, domestic road network, export diversification, value added exportation, production incentives, macroeconomic stability, allowing the private sector to lead in production and the generation of foreign exchange and diplomatic missions that generate opportunities for export business, among others," said CDH.