alawi’s forex shortage is threatening operations in the airline business, creating uncertainty on the future of the industry, Business News has learnt.

Frustrated by events in the foreign exchange market in the country, some sources in the airline business have confided in Business News that some operators are now seeking an audience with key economic agencies in the country such as Reserve Bank of Malawi (RBM), ministries of Finance and Economic Affairs as well as Ministry of Transport and Public Works while gauging the future of their respective businesses.

The sources say as it stands, it is proving difficult for most airline operators to convert local currency and transfer such currency into their foreign currency denominated accounts as stipulated in their respective bilateral agreements.

A senior official from the aviation industry told Business News on condition of anonymity that it is impossible to rule out that some operators may suspend their businesses in Malawi.

The aviation business is strugling amid forex shortage

Said the source: “Since last year, most airline operators have had challenges in remitting foreign exchange and this means that their capital is tied up in Malawi and if this persists, in the near future they may stop operating in Malawi.”

The official said currently, it is hard for most airline industry players to cover operating costs due to a combination of factors, including scarcity of foreign currency.

Speaking separately, another official from Ministry of Transport and Public Works, who is conversant with airline operations in Malawi, said presently “sustainability of airline business in Malawi is in question and the future looks gloomy unless government intervenes”.

Said the source: “There is too much foreign exchange rationing which is affecting direct operators.

The 2022 government annual economic report, the air transport sector continues to suffer from the effects of the Covid-19 pandemic, highlighting that “aeronautical” revenue performance of 2020/21 financial year was 81 percent down from that of pre-Covid-19 era.

Meanwhile, RBM spokesperson Ralph Tseka told journalists in Mzuzu on Wednesday that there is no need to press the panic button over forex situation, saying the country is sitting on a combined 3.4 months of import cover in public and private sector reserves.

RBM Governor Wilson Banda recently said the country needs to diversify from its dependence on tobacco, tea and sugar for icreased forex generation, pointing out that mining could be the future to provide the much-needed foreign currency

In the 2021 marketing season, for example, the country earned $197.1 million worth of foreign currency against a monthly demand or import requirement of $250 million.

Economist Gowokani Chijere-Chirwa, who teaches economics at the University of Malawi, said should the airline players suspend their operations, the move would automatically affect Malawi’s tourism sector. n

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