Malawi Will Not Devalue, and the IMF Will Not Sign
MALAWI · ECONOMY
Key Facts
—The standoff: The IMF wants Malawi to float its currency, but President Mutharika refuses to devalue the kwacha.
—The unfinished deal: An IMF team visited 9-18 June 2026 and left without a new lending arrangement.
—What the shortage looks like: Malawi’s central bank says low foreign currency supply hits fuel and medicine imports hardest.
—The reserves position: Reserves sit below three months of import cover, a minimum safety margin.
—The price line: Inflation was 28.7% in September 2025, projected below 21% in 2026.
—The growth line: Growth rises from 2.7% to 3.8% in 2026, then 4.9% in 2027, if imports flow.
—The catch: No devaluation and no IMF deal, though talks continue and reforms are discussed.
Malawi’s foreign currency crisis is a standoff over policy. The IMF wants Malawi’s exchange rate to move more freely.
The government has promised not to devalue the kwacha, Malawi’s currency. Importers keep queuing for dollars that the central bank says are not there.
What the shortage looks like on the ground
Malawi’s central bank, the Reserve Bank of Malawi, has said foreign currency supply remains low compared with demand. In a country that imports most of what it uses, that means fuel queues and empty pharmacy shelves.
Reserves have stayed below the three months of import cover that economists treat as a minimum safety margin. The authorities have pointed to gold purchases as one way to rebuild that cushion.
That plan has already had one setback. In April 2026 the central bank sold off about 590 kilograms of gold it had spent years accumulating.
The money helped pay for urgent fuel imports.
President Peter Mutharika took office in October 2025 and did not soften the picture. “There’s no food, there’s no forex, a fuel shortage,” he said in his inaugural speech, adding that living costs were “sky high.”
His government wants to stabilise the kwacha and restore fuel and foreign currency supply. Those two goals pull against each other, since holding a currency’s price down by decree is what starves the supply of it.
Why the IMF will not sign
An IMF staff team visited Malawi from 9 to 18 June 2026 and left without agreeing a new lending arrangement. The Fund said talks would continue, and that progress depends on the government’s willingness to carry out reforms.
The central disagreement is the exchange rate. The Fund argues that an official rate far from the market rate creates a parallel market, rations imports and quietly taxes exporters.
The government counters that devaluation would import more inflation. Prices were already rising 28.7 percent a year in September 2025, so that fear is not unreasonable.
Both arguments have merit. The unresolved question is which cost the country is already paying, and months of fuel queues suggest an answer.
The arithmetic of a fixed rate in a small import economy
Malawi grows tobacco, tea and sugar, and mining is adding to that list. It imports almost everything else, including fuel and fertiliser, and export earnings are seasonal while import needs are not.
If the official exchange rate sits above what the market would set, exporters get fewer kwacha for their crops. Importers, meanwhile, cannot buy enough foreign currency at that official price.
So trade shifts to an unofficial market, and the shortage becomes permanent rather than temporary. The exchange rate stops working as a price and starts working as a queue.
The counter-argument is also real. In a small, thin currency market, simply letting the rate float can send it far past any reasonable level before it settles.
The fertiliser problem underneath it
Malawi’s farming calendar needs imported fertiliser, paid for in foreign currency months before any harvest brings money in. That timing gap is why a currency shortage becomes a food question, not just a market headache.
A missed planting window can cost an entire year’s harvest. That is why aid donors and the IMF treat the exchange rate as urgent, not a routine technical matter.
The government has been trying to secure fertiliser through direct deals with suppliers while the wider talks continue. That buys time, but it does not settle the underlying price problem.
What outside readers should take from it
Malawi is not a market most investors touch directly, but it shows a pattern common to poorer economies. A currency price held by decree eventually limits growth instead of protecting it.
The country has also had other governance troubles this year. A court ordered the Reserve Bank of Malawi to pay a large bill after it cut staff pay unlawfully.
Separately, Malawi’s state fuel importer, NOCMA, lost more than US$400,000 to a payment scam in 2026. Fraudsters posing as a genuine supplier persuaded the company to wire the money abroad.
These episodes matter less for their size than for what they say about institutional strength. A lending programme depends on the machinery that has to carry it out.
There is an upside case too. Inflation is falling from its 28.7 percent peak, and growth could reach 4.9 percent by 2027 if fuel and fertiliser keep arriving.
A new mining pipeline, including graphite and rare earth projects, could also add export earnings in the coming years.
What to watch next
The first thing to watch is whether the IMF and the government reach a formal staff-level agreement, not just another visit. The second is the gap between the official and unofficial exchange rates, the clearest sign of whether policy is working.
The third is fertiliser delivery ahead of planting season. That is where a currency argument turns into a harvest, or the lack of one.
Frequently Asked Questions
Why has Malawi not agreed a new IMF programme?
An IMF staff visit ended on 18 June 2026 without a deal. The Fund said progress depends on reforms being carried out.
The main disagreement is the exchange rate. The Fund wants it freed, and the government has refused to devalue.
How bad is the foreign currency shortage?
The Reserve Bank of Malawi says supply remains low compared with demand, and reserves sit below three months of import cover. Fuel and medicines are among the hardest-hit imports.
What is Malawi’s inflation rate?
Inflation stood at 28.7 percent in September 2025 and was projected to fall below 21 percent in 2026.
What growth is expected in Malawi?
Growth was expected to rise from 2.7 percent to 3.8 percent in 2026, then to 4.9 percent in 2027. That assumes fuel and other imports keep arriving.
How does the government plan to rebuild reserves?
Officials have pointed to gold purchases and tighter foreign currency rules. But the central bank sold much of its gold stockpile in April 2026 to help pay for fuel.
Connected Coverage
Malawi’s institutional troubles are covered in our reports on the central bank pay ruling and a cash-transfer programme running in the same economy. For a contrasting outcome in a similar negotiation, see how another African government settled with the Fund.
This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error
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