The Lazarus Chakwera administration’s politicisation of fuel price decisions has caught up with Malawians as the impact of holding prices for nearly two years has partly culminated in a 41.6 percent average price hike yesterday.
The increase comes less than four months after a 33.2 percent average hike on October 1 last year, which, taken together with yesterday’s, translates to a cumulative 87.8 percent spike as the market self-corrects ever since the Peter Mutharika administration restored the largely market-driven automatic pricing mechanism (APM) formula, in force as a pricing policy since 2012, but which the Chakwera administration effectively suspended to keep prices artificially low.
These sudden, severe price shocks are typical when a government artificially holds prices in the misguided belief that it is protecting households and firms—until the unsupported prices are no longer sustainable, triggering the kind of devastating spikes witnessed yesterday and last October.
Malawi Energy Regulatory Authority (Mera) board chairperson Lucas Kondowe said as much yesterday, noting that Mera has historically adopted the APM policy under which a movement in model parameters increase/decrease of more than five percent triggers an automatic price adjustment.
He said: “However, in the last three years, this mechanism was abandoned in favour of a fixed pricing regime that proved to be commercially unsustainable. This led to significant trading losses, resulting in inability to import adequate petroleum products and inability to remit economically important levies like the Road Levy to the Road Fund Administration [RFA] and Rural Electrification Levy to Malawi Rural Electrification Programme [Marep].”
Economists yesterday agreed that the increases, while long overdue, will now lead to plummeting household purchasing power among other severe, long-term economic damages such as the current high and unsustainable total public debt that now stands at around 90 percent of Malawi’s gross domestic product.
Yesterday’s announcement of the new prices by Mera also included adjustments to some fuel levies, which form part of the petroleum pump price build up.
In separate interviews yesterday, leaders of the Economics Association of Malawi (Ecama), Malawi Confederation of Chambers of Commerce and Industry (MCCCI), Transporters Association of Malawi, among others, acknowledged the necessity of the increases, but urged government to strike a balance between responding to market forces, which could help to ensure product availability on one hand and cushioning consumers, on the other.
Ecama president Bertha Bangara-Chikadza said given that the economy is still absorbing the shock from the October 1 2025 fuel price hike, there is need to cushion households before fully passing on additional costs to allow better policy coordination and ensure that fiscal, monetary and supply-side measures are aligned.
She said: “Mindful that we need to be competitive regionally to avoid subsidising other countries by making the product cheaper, we need to strike a balance, how and when these adjustments are made matters greatly.
“While the automatic pricing mechanism helps ensure fuel availability and limits fiscal losses, government also has a responsibility to manage the broader economic impact.”
Bangara-Chikadza, who teaches economics at the University of Malawi in Zomba, advised government to adopt a gradual and predictable adjustment mechanism to avoid sudden shocks to households and businesses, align price adjustments with the country’s income levels, productivity and social conditions and strengthen social protection measures to cushion the most vulnerable groups.
Mera hiked fuel pump prices by an average of 41.6 percent with a litre of petrol fetching K4 695 from K3 499 while a litre of diesel is fetching K4 945 from K3 500. Last October, Mera hiked prices by 33.16 percent, which was the first jump in two years.
In a separate interview, MCCCI chief executive officer Daisy Kambalame said while the hike is necessary, it will intensify existing economic pressures, including persistently high non-food inflation and acute foreign exchange constraints.
She said that the impact on businesses is substantial, with transport, agriculture, manufacturing and logistics sectors experiencing sharply rising operating costs and reduced competitiveness.
Said Kambalame: “These series of fuel hikes has been exacerbated by a series of rapid policy and market adjustments, including increased taxation measures and high cost of electricity tariffs under the third tranche of the base tariff adjustment.
“The cumulative effect of these shocks places the private sector and consumers under considerable strain, raising concerns about reduced competitiveness, slower recovery prospects and heightened risks of business contraction in the short to medium term.”
Transporters Association of Malawi spokesperson Frank Banda observed that for wet cargo, transporters are happy because fuel used in Malawi was bought in Tanzania at higher prices and sold at a loss, while for dry cargo players, most of the companies will face problems as they are not regulated.
Fuel prices now incorporate close to 10 levies, several of which have risen sharply.
For petrol, the Road Levy jumped by 271 percent from K140 to K520 per litre while the Rural Electrification Levy rose by 263 percent from K57 to K207. On the other hand, the Price Stabilisation Fund (PSF) levy increased by 35 percent from K114 to K154.
Ideally, Mera uses PSF to cushion consumers when changes in the in-bond landed cost (IBLC) go outside the trigger band of plus or minus five percent.
Other charges such as the Malawi Bureau of Standards Cess, Carbon Tax and Strategic Fuel Reserves Levy were maintained, while the Distribution Fund levy was adjusted marginally from K7 to K9.
In the December 2025 Malawi Public Financial Review, the World Bank observed that delayed and inconsistent application of the APM—suspended from December 2023 until September 2025—depleted the PSF and created arrears for fuel importers, which will take years to settle and likely require fiscal transfers. The bank said the implicit subsidies are highly regressive, with the richest 20 percent consuming most of Malawi’s fuel.
See amother story on the fuel price hike in Business News Section in this edition
