Since Malawi is experiencing severe shortages of foreign exchange money, two international airlines have been forced to temporarily halt part of their flights in the country. The situation has proven detrimental to a significant number of additional local and international companies who operate across borders.
The Reserve Bank of Malawi’s most recent report on monetary policy indicates that the country’s official gross foreign exchange reserves in the first quarter of this year stood at $374.48 million. This figure represents a decrease from the fourth quarter of last year’s total of $429.17 million, when the reserves were reported to be $429.17 million.
According to another finding in the study, the private sector’s foreign currency reserves fell to $391.49 million this year, down from $425.52 million in the previous year.
Because of this, there is a serious shortage of foreign currency on the market, which has pushed international merchants to quit doing business in Malawi altogether or to stop doing portion of their business there.
According to Muhammad Gaffar, who owns Gaffar Travels, a ticket agency, and Gaffar Airlines, which operates flights between Johannesburg and Europe, the shortfall has had a significant impact on his company’s profitability.
“We are unable to offer tickets from Malawi to other countries,” he added. “However, we are able to issue tickets for persons going from Malawi from our other offices, such as our main office in the United Kingdom, our office in India, Pakistan, and Turkey.” We are suffering significant losses in business in Malawi until this problem with the local currency can be resolved.
Ethiopian Airlines and Kenya Airways both temporarily halted their ticketing systems for local travel brokers in Malawi one week ago, mostly due to the lack of available foreign currency in the country.
Ethiopian Airlines stated in a statement that the decision was taken because the Reserve Bank of Malawi has been unable to send money to their accounts owing to diminishing foreign reserves. The announcement was made public after Ethiopian Airlines announced the decision.
As a result, travelers flying on these airlines from Malawi are now need to purchase their tickets through agents located in other countries.
According to the authorities, public hospitals are experiencing a shortage of crucial medications since the government is unable to acquire them.
During an interview with a local radio station, the general secretary of the Cross Border Traders Association of Malawi, Victoria Mwafulirwa, said that the situation has caused disruptions to their companies’ operations.
For instance, you may already be aware that there is no manufacturing of packaging material in Malawi. She said that it was necessary to import it. In order for it to be imported, it must first be paid for in advance; yet, in order for it to be paid for in advance, the foreign currency in question must be easily accessible, which is not the situation right now. As a result, you will observe that it impedes the progression and procedures at every stage of the operations of various industries.
According to Betchani Tchereni, a professor in economics at Malawi University of Business and Applied Sciences, the issue is mostly caused by the fact that the nation does not create a sufficient amount of goods suitable for export.
“This is due, Number 1, to our poor export basis, and Number 2, the lack of donor support,” Tchereni added. “This is attributable to our low export base.” “You may recall that development partners, many of them, decided to pull out of the country, and when that happened, it reduced the amount that is normally made available to the economy in terms of foreign exchange,” “You may recall that when development partners decided to pull out of the country, it resulted in a reduced amount of foreign exchange.”
This difficulty with foreign money arises at a time when tobacco, Malawi’s primary export commodity, accounts for more than sixty percent of the country’s profits in foreign currency.
According to Tchereni, the amount of tobacco exported in this year offers little possibility of making up for the deficit.
According to Tchereni, “By the way, we are at the very beginning of the tobacco selling season, but the volumes are not so excellent; this year, not a lot of people ventured into the cultivation of tobacco.” Additionally, you may remember that the storms that swept through the area caused significant damage to not just our tobacco but also the product of many other farms. Therefore, it follows that we won’t be able to achieve as much.
According to data that was only recently made public in Malawi by Auction Holdings Limited Group, sales of tobacco products over the course of the most recent five weeks have plummeted by 78 percent when compared to the same time during the previous year.
According to Winford Masanjala, the senior secretary for the Department of Economic Planning in Malawi, the government is attempting to alleviate the shortages of foreign cash.
He said that it is necessary for a country to generate commodities and services that it is capable of selling to other nations. “At the present time, Malawi’s potential for exporting goods falls short of the country’s demand and hunger for imports.” This is the reason why the government of Malawi believes that within the next year to three years, we need to have certain mines in Malawi reactivated in order for us to have other sources of foreign cash.
Once the International Monetary Fund continues financing Malawi with what is known as the Extended Credit Facility, the government of Malawi has expressed the expectation that the country’s foreign currency reserve would start to rise. Countries that have had persistent issues with their payments might get financial help from the ECF. It is anticipated that negotiations for the ECF will start on Wednesday of this week.
