The World Bank has expressed fear that increased costs of fertiliser and fuel due to the impact of the ongoing war between the US and Israel against Iran poses fresh challenges on global economies.
In a notice dated March 26 2026 published on its website, the bank said it is working with governments, the private sector, regional partners and other stakeholders to find solutions to the new set of challenges.
Reads the bank’s statement: “Shipping route disruptions are increasing costs, and supply risks are spreading from energy into fertilisers and other critical agricultural inputs.
| Nation
“Crude oil prices increased by nearly 40 percent between February and March, the price of liquefied natural gas shipments to Asia rose by almost two-thirds, and the prices of nitrogen-based fertilisers increased by nearly 50 percent in March.”
The bank further said that it was ready to respond by combining immediate financial relief with policy expertise and private sector support for the recovery of jobs and growth.
It said: “Our aim is to deliver immediate relief by leveraging our active portfolio, our crisis response toolkit, and pre-arranged financing facilities. We will transition progressively to fast-disbursing instruments anchored in sound policies to underpin recovery.
“Clearly, this is an evolving situation and we cannot predict the full range of impacts. As everyone has said, the longer this lasts, and the more damage there is to critical infrastructure, the more challenging this will be for our clients.”
Last week, the United Nations Resident Coordinator’s Office in Lilongwe said the shock could quickly hit through fuel, fertiliser and trade channels, thereby exposing structural weaknesses in an already fragile economy.
Earlier, Economics Association of Malawi president Bertha Bangara-Chikadza said a surge in fuel prices was likely to subject countries that rely on imports such as Malawi to inflationary pressures on essential goods, transport and manufacturing.
She said: “Increased cost of fuel, in particular, may deplete foreign reserves and exert pressure on the exchange rate. All these could undermine efforts to attain the estimated growth rate, affecting revenue collection targets and indeed result into higher levels of budget deficits than the one indicated in the budget.
“In addition, these factors jeopardise the efforts to bring inflation down to the 15 percent target indicated in the national budget.”
Bangara-Chikadza, who teaches economics at the University of Malawi in Zomba, said while ensuring continuous supply of fuel into the country, government could also move with speed with efforts to have organised and reliable public transport systems in order to significantly cut on fuel needs for the country.
Mzuzu University (Mzuni)-based economist Chris Mbukwa said the situation may compound the forex challenges Malawi is already experiencing because higher fuel prices worsen forex demand.
“The issue of automatic pricing mechanism comes into play here. Depending on the dynamics, the prices have to adjust as well. Even so, we need to continue to grow our fuel buffers,” he suggested.
While indicating alternatives markets to West African countries and Asian refineries, Mbukwa said deliberate efforts must be made to continue prioritising scarce forex towards fuel.
Mbukwa’s colleague at Mzuni, Abel Mwenibanda agreed, stating that the war poses far reaching consequences on Malawi’s economy stemming from the disrupted supply chain of strategic goods and services which may render the economic assumptions holding the just presented fiscal budget become unrealistic and unsound.
For economist Milward Tobias, since the Middle East is a market for some goods from Malawi including labour export, trade will also be affected.
Based on the Observatory of Economic Complexity database, in 2024, Malawi exported $25.5 million products to the United Arab Emirates (UAE) through raw tobacco, dried legumes and scrap iron as well as $1.33 million coffee, tea, mate and spices to Saudi Arabia.
On average, Malawi consumes one million litres of petrol and one million litres of diesel per day, translating to 60 million litres of petrol and diesel per month and 720 million litres of both items per year.
