Friday’s flopped foreign exchange auction, evidenced by the authorities’ failure to attract many authorised dealers, proves that local commercial banks have no forex.
The Reserve Bank of Malawi (RBM) conducted the inaugural auction in a desperate attempt to access forex at market value but only three of the eight banks participated.
The poor participation means the Central Bank cannot use the results to determine the official exchange rate.
“Being the first price discovery auction, the Reserve Bank of Malawi noted and appreciated the rate submitted by the three dealer banks and will continue to engage all other banks in preparation for the next auction,” reads the statement.
Signed by Governor Wilson Banda, the statement further says the bank remains committed to finding a market determined rate.
In his reaction, former finance minister Joseph Mwanamvekha argues that this as a sign that there is no foreign exchange in commercial banks.
“To me it is no surprise that the banks have not participated that much, because there is no forex, where would they get it?. In any case I hear they have a lot of backlog, a lot of obligations to pay outside the country but they cannot pay because there is no forex,” Mwananvekha said.
Head of economics department at Catholic University Hopkins Kawaye concurs with Mwanamvekha, citing that that most banks do not have forex.
“I think there was a need for a proper sensitisation or a press conference to disseminate information to the public and the banks themselves on what the auction was all about,”Kawaye said.
Kawaye adds that the first auction was also done on short notice, hence most banks were not ready.