The Economics Association of Malawi (Ecama) has urged caution over the recent sharp appreciation of the kwacha on the parallel foreign exchange market, warning that the shift is more a reaction to government’s measures than a sign of sustained economic stability.
The kwacha has strengthened against major currencies, with the exchange rate improving from K5 000 to K4 000 per US dollar and from K250–K255 to K180 per South African rand, according to small and medium enterprises (SMEs) and forex traders. The movement follows a government crackdown on illegal forex trading in Lilongwe and Blantyre.
However, Ecama president Bertha Bangara-Chikadza, who also teaches economics at the University of Malawi, noted that while the appreciation may appear positive, it does not reflect a fundamental improvement in Malawi’s forex position.
“The sudden shift in the black-market rate is a direct response to our authorities’ crackdown on illicit forex trading. However, it also exposes deep-seated demand-supply imbalances that continue to undermine our economy,” she said in a WhatsApp response.
She stressed the need for long-term strategies to ensure sustainable forex availability. “We need medium- and long-term measures that not only boost the supply of foreign exchange but also promote import substitution,” she added.
Bangara-Chikadza proposed reforms in key sectors such as mining, tea, coffee, and agriculture to enhance foreign exchange earnings and ensure proper accounting for export revenue. She stressed that structural changes, rather than short-term interventions, would provide lasting stability.
The dramatic shift in the exchange rate comes amid broader efforts by the Reserve Bank of Malawi (RBM) to curb illegal forex trading. RBM spokesperson Boston Maliketi Banda expressed appreciation for the support of law enforcement agencies, the media, and the public in the ongoing crackdown.
“After conducting a thorough analysis of the illicit activities by black-market players, RBM and the Ministry [of Finance and Economic Affairs] will soon announce measures to combat black market operations and to enhance the productive capacity of producers of export products and import substitutes,” he said in a WhatsApp response.
Despite the decline in the parallel market rate, official central bank data show that Malawi’s forex reserves remain weak. As of December 2024, total reserves stood at $530.9 million—equivalent to 2.1 months of import cover—showing only a marginal increase from $516.9 million in November.
The forex position also remains weaker than the $568.9 million (2.3 months of imports) recorded in November 2023, when the government devalued the kwacha by 44 percent in an effort to stabilise the economy.
