Disruption in the Middle East region following a joint US and Israel attacks on Iran has raised fears that supply of fuel and other goods could negatively impact countries such as Malawi.
Middle Eastern countries such as the United Arab Emirates (UAE), Saudi Arabia and Kuwait use the Strait of Hormuz, the main maritime route for the Persian Gulf nations, to export fuel and other commodities to the rest of the world, including Malawi. However, the route is now blocked.
Prices of fuel per barrel have already jumped to over $70 (about K122 570) from around $60 (about K105 060).
International media outlets, including BBC and CNN describe the Strait of Hormuz as the strategic route for about 20 million barrels of oil and 20-30 percent of global liquefied natural gas (LNG) daily shipments.
Closer home, experts are wary that with the dire forex situation in the country, what the situation presents is that foreign exchange will be needed to buy the same quantity of fuel the country is paying less presently, which will further weaken the balance of payments.
In an interview yesterday, Economics Association of Malawi (Ecama) president Bertha Bangara-Chikadza said a surge in fuel prices is likely to subject countries that rely on imports such as Malawi to inflationary pressures on essential goods, transport and manufacturing.
She said: “Increased cost of fuel, in particular, may deplete foreign reserves and exert pressure on the exchange rate. All these could undermine efforts to attain the estimated growth rate, affecting revenue collection targets and indeed result into higher levels of budget deficits than the one indicated in the budget.
“In addition, these factors jeopardise the efforts to bring inflation down to the 15 percent target indicated in the national budget.”
Bangara-Chikadza, who teaches economics at the University of Malawi in Zomba, said while ensuring continuous supply of fuel into the country, government could also move with speed with efforts to have organised and reliable public transport systems in order to significantly cut on fuel needs for the country.
Mzuzu University (Mzuni)-based economist Chris Mbukwa said the situation may compound the forex challenges that Malawi is already experiencing because higher fuel prices worsen forex demand.
“The issue of automatic pricing mechanism comes into play here. Depending on the dynamics, the prices have to adjust as well. Even so, we need to continue to grow our fuel buffers,” he suggested.
While indicating alternatives markets to West African countries and Asian refineries, Mbukwa said deliberate efforts must be made to continue prioritising scarce forex towards fuel.
Mbukwa’s colleague at Mzuni, Abel Mwenibanda agreed, stating that the war poses far reaching consequences on Malawi’s economy stemming from the disrupted supply chain of strategic goods and services which may render the economic assumptions holding the just presented fiscal budget become unrealistic and unsound.
He said: “This will exert pressure on our already struggling kwacha and also trigger inflationary pressure directly or indirectly. Subsequently, the import-export gap will continue to yawn wider.”
Mbukwa also urged government and stakeholders in the energy sector to come up with deliberate measures such as bulky volume purchase and increasing number of suppliers to counter both pricing and availability externalities.
For economist Milward Tobias, since the Middle East is a market for some goods from Malawi including labour export, trade will also be affected.
Based on the Observatory of Economic Complexity (OEC) database, in 2024, Malawi exported $25.5 million products to the UAE through raw tobacco, dried legumes and scrap iron as well as $1.33 million coffee, tea, mate and spices to Saudi Arabia.
Yet that same year, the UAE exported to Malawi refined petroleum ($96.5 million), nitrogenous fertilisers ($63.7 million), and mixed mineral or chemical fertilisers ($36.2 million),while Saudi Arabia exported nothing to Malawi.
But economic statistician Alick Nyasulu said except for fuel imports, Malawi’s trade with the Gulf States is limited, hoping that the country will stock enough in fuel reserves and diverse fuel sources before the situation worsens.
Malawi Energy Regulatory Authority (Mera) spokesperson Fitina Khonje was yet to respond to our query by press time.
In December, the National Oil Company of Malawi (Nocma) said it would import about 412 000 metric tonnes (about 549 million litres) of fuel in the 2026/27 financial year, an equivalent of 60 percent of the country’s consumption.
On the other hand, the Petroleum Importers of Limited (PIL), a consortium of private sector oil marketing firms, also issued its tender calling for suppliers of about 176 300 metric tonnes (about 200 million litres).
On average, Malawi consumes one million litres of petrol and one million litres of diesel per day, translating to 60 million litres of petrol and diesel per month and 720 million litres of both items per year.
