Malawi’s foreign exchange market is facing renewed pressure as demand for United States dollars continues to outstrip supply, raising concerns about the stability of the kwacha and the country’s ability to meet essential import needs.
New figures from the Reserve Bank of Malawi (RBM) show that Authorised Dealer Banks (ADBs) sold significantly more foreign currency to clients than they purchased during the first week of May.
Between May 5 and 9 2025 forex sales totalled $32.08 million, nearly double the $16.22 million bought from the market. This trend, now observed for three consecutive weeks, suggests mounting stress in the country’s external position.
The imbalance is most pronounced in daily transactions. On May 7, for instance, ADBs sold $16.47 million but only managed to purchase $2.95 million—a six-fold disparity highlighting the deepening shortage of forex inflows relative to outflows.
The data also shows that from April 28 to May 2, banks sold $30.08 million while purchasing only $13.97 million, reinforcing the view that structural factors are driving the sustained forex gap.
Despite the growing demand-supply mismatch, the RBM has maintained a relatively stable official exchange rate. As of May 13, the indicative middle rate stood at K1 734.01 per US dollar, marginally lower than the actual trading rate of K1 750.89 recorded on May 12.
Market watchers, however, warn that continued strain may eventually erode the central bank’s ability to stabilise the currency without policy adjustments or intervention.
Economic analysts say the pressure reflects a combination of weak forex inflows and heightened import demand.
“We are seeing the effects of delayed donor support, low export receipts, and rising demand for strategic imports like fuel and fertiliser,” said Scotland-based Malawian economist Velli Nyirongo.
The imbalance comes amid broader concerns about the economy’s ability to sustain recovery. The RBM’s Financial Market Developments report shows a tightening liquidity environment, with banks borrowing K86 billion overnight at an average rate of 23.2 percent.
Small and medium enterprises (SMEs) are among the most exposed. Many rely on forex to import raw materials, spare parts, or finished goods. In interviews conducted for this report, SME operators cited delays in accessing dollars, rising input costs, and uncertainty over pricing as key concerns.
In an earlier interview, Chindikani Investments manager Martha Nyirenda said some SMEs, including her business, have resorted to borrowing from forex traders, some of which offer higher prices than normal.
Speaking at the Monetary Policy Technical Forum in Lilongwe, Economics Association of Malawi executive director Esmie Kanyumbu urged the central bank to implement policies that prioritise investment to the real economy.
“The central bank should ensure that there is funding directed to key economic sectors such as agriculture, tourism, mining and manufacturing,” she said, referring to a previous study Ecama co-published with the National Planning Commission.
