By Chimwemwe Lusungu
Claims last month by information minister Kondwani Nakhumwa that the country’s foreign reserve position is at 3 months of import cover has come under scrutiny with economic experts questioning how the minister arrived at such figures at a time when there is a donor aid freeze and tobacco is doing badly.
The information minister, who has built a reputation for himself as a lair after the CCTV saga, last month said in a statement that the official foreign reserves, are at $646.26 million translating into an import cover of 3.38 months.
Nankhumwa said in a published statement that the private sector official foreign reserves are at $325.94 million — which is 1.71 months of import cover.
This, according to the minister, “cumulatively, means the country has a total of $972.16 million in foreign reserves translating into an import cover of 5.1 months.”
He attributed the sudden surge in the reserves to the inflow of $200 million debt contracted from PTA Bank which it says has induced the flow of foreign currency on the market.
But an economic government commentator at the Faith-based Centre for Social Concern (CFSC) Mathias Kafunda questions the authenticity of the figures and how the local currency has appreciated rapidly during ‘difficult economic circumstances.’
“The country has been struggling to attract enough capital inflows to finance a current account deficit for almost the whole 2014, under these circumstances, one would expect to see a depreciation in the currency; so what really happened to have positive result of appreciation?” he queried.
During the months of December last year, the Kwacha made a u-turn to begin to appreciate after months of massive deprecation from September last year.
The currency lost about 33 percent value against the United States Dollar between the two time frame as it fell from a value of K390 in September to trade to a record low value of K520 and K530 in the authorised dealer banks and black market, respectively.
And another economist working as a banker at one of the country’s commercial bank, trashed the figures cited by government saying the $200 million inflow is far much below to trigger a 5.1 months of import cover.
Said the economist: “This money in foreign currency [worth $200 million], is just equal to one month of import cover and remember this is January when demand for foreign currency is just too much.
So where are supplementing foreign reserves coming from when we haven’t even started selling our tobacco?”
Malawi consumes $191 million in foreign currency as calculated by the Central Bank, Reserve Bank of Malawi (RBM).
But Nankhumwa said the accumulation of the foreign reserves has never happened before in Malawi’s history.
“It is the first time for the country to hit such levels of reserves and import cover even at the highest periods of good economic growth.
The above is a result of sound economic policies and government strategic thinking as spearheaded by President Professor Arthur Peter Mutharika.”