By Staff Reporter
DIVERFISIED financial group Old Mutual (OM) says the tobacco and gold foreign currency inflows are expected to improve the supply of foreign currency in the country to support the seemingly overstretched foreign currency auction.
The group in its monthly economic update urged Government to properly finance grain purchase in order not to increase money supply, stoking inflation in the near term.
However, OM was cautiously optimistic of the economic outlook.
“Tobacco and gold foreign currency inflows are expected to improve the supply of foreign currency in the country to support the seemingly overstretched foreign currency auction. Grain purchases if improperly financed are likely to increase money supply, stoking inflation in the near term. Cautious optimism is maintained on the outlook”.
“The tobacco marketing season opened on the 7th of April 2021 with high hopes of overall improvement in foreign currency liquidity in the country. Tobacco is the country’s second highest foreign currency earner after gold, with China and South Africa being the major buyers.
Output for the current marketing season is projected at 200 million kilograms, up from 180 million kilograms produced in the 2020 season.
Growth in output is mainly due to a 6.84% increase in hectarage under tobacco, which was up from 117,000 hectares in the prior season to 125,000 hectares in the 2020/21 season.
A total of 52.092 million kilograms worth US$135.55 million were traded at an average price of US$ 2.60 as at the 30 April 2021 (day 17). Volumes and values were up by 68.19% and 95.13% respectively relative to the same period last year. Prices increased by 16.07% on account of improved quality, allaying earlier concerns of potential quality gaps due to excessive rains” said OM.