Think-tank foresees pressure on kwacha

The Economist Intelligence Unit (EIU) has projected that the kwacha will weaken gradually although the Malawi Government will likely continue to resist devaluation calls in short to medium-term. The United Kingdom-based economic think-tank, which is part of the Economist Group, has since projected that the local unit will trade at K2 792 against the dollar by 2030 based on continued pressure from the International Monetary Fund (IMF). The forecast, quoted in the Nico Asset Managers Monthly Economic Report for February 2026, attributed this to persistent shortages of hard currency and speculation which has seen the spread between formal exchange rate and informal rate still wide at K1 751 and K3 800, respectively.

Reads part of the report: “The IMF will continue to push for Malawi to shift towards a market-determined exchange rate, but in the absence of a funded programme the authorities will continue to heavily manage the Malawian kwacha. “With foreign exchange reserves remaining perilously low, the central bank will continue to operate tight exchange rate controls and limit access to foreign currency through official channels to compress demand, but EIU believe periodic devaluations will be inevitable and only a question of timing and scale. The kwacha will weaken gradually in 2027-2030 to an average of K2 792:US$1 in 2030.” EIU’s forecast comes weeks after the National Planning Commission said in a policy brief that exchange rate unification (devaluation) could help solve current economic challenges like forex scarcity, but needs to be implemented jointly with a broad reform package to ensure stability.

For instance, EIU observed that although removing the exchange rate regime would trigger rampant inflation and worsen livelihoods, the widespread importation of products at informal exchange rates means that the average citizen derives little real benefit from the maintenance of the official rate. Reads the brief in part: “The priority now is to complete exchange rate unification, decisively and transparently, so that Malawi can put an end to opaque and uncertain access to foreign currency, allowing importers to source essential inputs, formal exporters to be rewarded at the true value of their outputs, and investors to plan and repatriate profits with confidence.” But it said the exchange rate unification is not a silver bullet, but an essential part of a broader reform package that also includes the adoption of sound fiscal and monetary policies and the establishment of a business environment that builds trust. Reserve Bank of Malawi (RBM) spokesperson Boston Maliketi Banda said in an interview on Monday that discussions with the IMF commenced to achieve macroeconomic stability and the devaluation topic is not involved.

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“In this case, every step will be carefully analysed to ensure that it benefits the economy. So far, it has been made clear that learning from lessons from the recent past devaluations, additional devaluation of the local currency is not part of this process.” In an interview, University of Malawi economics lecturer Edward Leman highlighted the need to solve the economy’s underlying structural challenges such as lack of production and exports. He said: “This is a structural imbalance we have struggled to address despite various policy documents over the years. “As long as demand for foreign currency consistently exceeds supply, the local currency will continue losing value.”

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