The Reserve Bank of Malawi (RBM) says it is prepared to act to contain inflation and exchange rate pressures triggered by global fuel and shipping disruptions occasioned by the Middle East crisis.
RBM’s comments follow a United Nations (UN) warning of rising macroeconomic risks linked to the escalating US-Israel–Iran war.
In an e-mail response on Friday, RBM spokesperson Boston Maliketi Banda said Malawi’s economic structure makes it particularly vulnerable to external shocks, especially through fuel and logistics costs.
He said: “Since we import all our fuel and many essential goods, increases in global oil prices or shipping costs tend to raise the cost of bringing these goods into the country.
“This puts pressure on the kwacha and on our foreign exchange resources.”
Maliketi Banda added that rising global costs are already filtering into domestic prices.
“Those costs can filter through to everyday items such as food, farm inputs and basic household goods,” he said.
A UN policy brief, titled ‘Middle East conflict: Macro-fiscal and socio-economic impact on Malawi’, published last week cautions that higher oil prices, rising freight costs and supply chain disruptions could reverse recent gains in inflation and intensify pressure on foreign exchange reserves.
The warning underscores growing risks to Malawi’s import-dependent economy, where global shocks are likely to transmit quickly through fuel, transport and food prices, raising the cost of living and threatening macroeconomic stability.
Malawi’s inflation dropped to 24.1 percent in February, according to the National Statistical Office.
Latest data from RBM show that total foreign exchange reserves stood at 2.1 months of import cover, far below the 3.9 months recommended for credit-constrained economies such as Malawi.
The UN brief estimates that a 15 percent increase in global oil prices could raise Malawi’s fuel import bill by about $8 million (about K14 billion) per month, further straining already limited foreign exchange reserves.
It also warns that inflation could reach 32 to 35 percent in the short-term if the shock persists, driven by higher fuel and transport costs feeding into consumer prices.
Scotland-based Malawian economist Velli Nyirongo said in an interview on Friday that the disruption to global fuel supply chains presents a direct and immediate risk to the country’s economy, reinforcing concerns raised by the central bank.
He said: “Any disruption to global oil supply or a rise in prices directly increases domestic inflation, transport costs and production expenses.
“Higher fuel costs spread quickly across the economy because they raise costs in agriculture, manufacturing and distribution.”
Nyirongo said the country faces a worsening trade balance and growing pressure on foreign exchange reserves, making the fuel channel both immediate and wide-ranging in its impact.
To contain these pressures, RBM said it stands ready to deploy monetary policy tools, including liquidity management, maintaining an appropriate policy interest rate stance and ensuring the orderly functioning of the foreign exchange market.
“Our focus is on preventing second-round price increases, keeping inflation expectations stable, and protecting overall economic and price stability,” said Maliketi Banda.
Economists warn that because of the Middle East conflict, Africa is experiencing severe economic repercussions, leading to soaring fuel prices and increased living costs across the continent.
