Forex crunch – official reserves under pressure

Forex reserves directly under the control of RBM dropped to merely 1.62 months of import cover at the end of October. The fact that Private Sector reserves remained relatively stable during the same period, implies that exporters are hedging against adverse rate movements by holding on to their exports proceeds in FCDA’s as long as possible. Another key fact to note is that, despite commercial banks buying and selling more than US$151 to date on November, importers still decry lack of forex liquidity in the market. We understand that strategic imports like petroleum will always get priority, but the impact on SME activity is devastating!