During the 10th edition of the Malawi Economic Monitor (MEM) last week, the World Bank outlined that the stability of the local currency could reduce the country’s competitiveness on the global market.

According to the Bretton Woods institution, appreciation of the currency makes imports more attractive, causing the demand for local products to fall, thereby widening the gap between imports and exports.

The input by the World Bank follows an Annual Economic Report that was released earlier this year, which projected that Malawi’s trade balance (the difference between the value of a country’s imports and its exports) could worsen by 16.4% this year. The report justified its projection by saying that all values of traditional export products are anticipated to go down in 2019.

Forward to the World Bank’s report this year, it was learnt that after depreciating by six percent relative to the dollar in the second quarter of 2019, the kwacha regained most of its ground by mid-August. Since then, the currency has remained stable, trading at an average of K740 to a dollar. “While generally a stable kwacha supports business confidence, it has, however, contributed to real exchange rate appreciation, which could reduce competitiveness and supports higher levels of import.” says part of the report.