In a joint policy note titled No Time to Waste: Policy Priorities for Malawi’s Recovery, the institutions say gross official reserves—foreign currency held directly by the Reserve Bank of Malawi (RBM)—have fallen to less than two weeks of import cover, while net reserves have remained negative since 2020. “These crises have sharply slowed economic activity, increased the cost of living and led to widespread shortages of fuel, fertilisers, pharmaceuticals and other essential goods,” the report states. It adds that accessing foreign exchange has become difficult even on the parallel market, where rates exceed the official exchange rate by about 150 percent—the second-largest spread globally.
RBM data show that total reserves stood at $526.8 million in recent months, equivalent to about 2.1 months of import cover—well below the 3.9 months recommended by international financial institutions—highlighting the strain on Malawi’s external position. Speaking at the launch of the policy note, World Bank country manager for Malawi Firas Raad described foreign exchange as the central constraint facing the economy, arguing that shortages ripple through inflation, growth and poverty outcomes. “Foreign exchange is one of the most important factors, and it influences many other areas of the economy,” Raad said, pointing to a persistent structural imbalance between exports and imports that has left Malawi with a chronic trade deficit.
Raad said resolving the crisis requires a dual-track approach—short-term measures to manage import demand alongside medium- to long-term reforms to expand foreign-exchange supply through exports, foreign direct investment, remittances and sustained development financing. “As the country exports more goods and services, more foreign exchange will come in,” he said, stressing the need to improve Malawi’s competitiveness and investment climate. The International Monetary Fund (IMF) has also flagged exchange-rate misalignment as a key source of economic distortion.
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IMF resident representative for Malawi Dr Nelnan Koumtingue said the official exchange rate remains significantly overvalued. “Our estimates show that Malawi’s official exchange rate is currently overvalued, creating significant distortions across the real economy,” Koumtingue said. He said the IMF’s Article IV policy advice recommends exchange-rate unification as part of a broader macroeconomic stabilisation package, but stressed that restoring policy credibility is the most urgent priority.
“The most urgent immediate policy step is to restore fiscal and monetary policy credibility, which will also help ease the pressure on the kwacha,” Koumtingue said. “This requires implementing a budget that is consistent with macroeconomic stabilisation goals, paired with a tightened monetary policy stance.” Private-sector voices at the event argued that Malawi’s forex challenge is not purely one of scarcity, but of confidence and policy-induced disincentives that keep foreign currency outside the formal system. Nico Capital chief executive officer Misheck Esau said foreign exchange is available in the economy, but weak instruments and institutional risks discourage formal participation. “The money is there, but the instruments to get involved and use that money are not available,” Esau said, urging authorities to deal decisively with distortions in the parallel market.
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