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Market Report Fortnight ending 14th March 2003 Report
05/03
Foreign Exchange Reserves
The economy is experiencing shortages of foreign exchange
attributable to rising demand in an environment of dwindling
supply. Latest numbers indicate that official reserves
had by the close of February 2003 declined to a low
of US$129.10 million; representing an import cover of
two months.
This has seen the Kwacha exchange rate
plummeting to an average of MWK91.00 to the USD. This
is a worrisome development in that if allowed to persist,
it could result into rising inflation. Severe depreciation
of the Kwacha has of late been associated with increases
in fuel prices, which inevitably lead to high production
costs. The commencement of tobacco sales this week is
therefore timely and will see an improvement in the
country's foreign exchange position. The pressure on
the Kwacha is therefore likely to ease in the short
and medium term. This will likely see the average exchange
rate coming down to MWK90.00 per USD by the close of
the next fortnight.
Financial Markets and Interest
Rates
The money market registered a general increase in yield
rates following the increased need to float government
paper with a view to meet treasury's perpetual revenue
shortfalls.
According to Treasury Bills auction results of 7th
March 2003, Treasury increased the required amount of
cash to be raised to K1 billion from K800 million it
required during the past four consecutive auctions.
Consequently, the yield rate for the 91
days bill increased to 37.25% from 37.19% recorded during
the auction of 28th February 2003. The rate for the
182 days bill stabilized at 38.07% while that for the
273 days bill decreased to 38.11% from 8.26%.
Yield rates for RBM bills also remained high with that
for the 91 days bill maintaining its upward trend. According
to results for the 4th March 2003 RBM bills auction,
the rate for the 63 days bill contracted marginally
to 36.92% from 36.95% registered a week before. However,
the yield rate for the 91 days bill increased to 37.15%
from 37.04%.
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