Kwacha weakens against rand, pound, data show

The Malawi kwacha has depreciated against the South African rand and British pound since the onset of the second half of this year, a situation experts fear could heighten inflationary pressure, particularly from South African imports.

Reserve Bank of Malawi (RBM) market data show that the local unit, which traded at K105.36 to the rand on June 30, has tumbled by 2.89 percent to K108.50 as of last week and weakened by 2.39 percent against the pound sterling from K2 290.44 to K2 346.60 during the same period.

Although the kwacha remained steady against United States dollar at K1 751 and slightly appreciated against the euro, analysts are worried that the situation with rand could affect prices of imports from  South Africa, which is Malawi is Malawi largest trading partner.

National Statistical Office data show that annual imports from South Africa are valued at about $500 million (about K875 million), which covers up to 15 percent of the total imports.

In its analysis in the Monthly Economic Report for August 2026, Nico Asset Managers Limited said although the stable dollar ensures fuel price stability, the depreciation to rand poses an inflation threat.

Reads part of the report: “The depreciation against the British pound and South African rand could increase the cost of imports from these trading partners, placing additional pressure on businesses and consumers reliant on imported goods.”

The investment advisory firm has also warned of the kwacha’s continued exposure to further depreciation mainly due to persistent foreign exchange shortages and the wide gap between the official dollar rate at K1 751 and the parallel rate at about K4 000.

In an interview on Tuesday, University of Malawi economics lecturer Edward Leman attributed the kwacha’s weakening against rand to rising demand of South African imports.

He said: “As it stands, the pressure on the local currency is still high and demand for foreign currencies remain high than supply.

“It’s not surprising, especially for South Africa as we import a lot from them.”

However, Leman said that with proper arrangements and policies, Malawi can take advantage of the abundant labour that is exported to South Africa and manage the reserves through remittances.

“Despite the recent xenophobic attitude, we still have a lot of Malawians residing in South Africa.,” he said.

Malawi Economic Justice Network executive director Bertha Phiri linked exchange rate fluctuations to amplifying inflationary pressures in the country, saying every depreciation of the kwacha quickly feeds into the cost of imported goods and production inputs.

She said that the RBM and International Monetary Fund studies estimate Malawi’s exchange rate pass-through of 0.3 to 0.5 within 12 months, which translates to a 10 percent depreciation of the kwacha that can raise non-food inflation by between three and five percent.

“This is high because of the high import content in the Consumer Price Index, including fuel, transport, packaging and spare parts,” she said.

Phiri said the situation is worsened by a thin foreign exchange market where businesses often raise prices in anticipation of higher import costs.

RBM Governor George Partridge, speaking during the consultation session on National Economic Recovery Plan in Lilongwe recently, said foreign currency continues to circulate within the economy, but distortions in pricing and demand have created severe market pressures.

Inflation rate was recorded at 20.8 percent in July, down from 21.1 percent in June driven by decelerating food inflation from although non-food inflation continued to rise.