Malawi must urgently unify its exchange rate regime and maintain a stable monetary policy stance to withstand mounting external shocks, according to a United Nations policy brief assessing risks linked to the escalating Middle East conflict.
The report themed, ‘Middle East Conflict—Macro-Fiscal and Socio-Economic Impact on Malawi’, identifies exchange rate unification and policy rate stability as critical to restoring macroeconomic balance, anchoring inflation expectations, and improving foreign exchange flows.
It notes that the current overvalued official exchange rate, alongside a widening parallel market premium, currently estimated at 140 percent, is discouraging exports and limiting formal inflows of foreign currency.
“A phased move towards a unified, market-clearing exchange rate is therefore recommended to reduce distortions and improve external balances,” the report reads.
On monetary policy, the report urges the Reserve Bank of Malawi (RBM) to resist further interest rate cuts following its recent reduction, warning that premature easing could worsen inflation and accelerate currency depreciation.
Instead, the central bank is advised to maintain a cautious stance and stand ready to tighten policy if inflationary pressures intensify, to avoid a depreciation–inflation spiral.
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Other immediate measures include reassessing fiscal assumptions to reflect emerging global risks and enforcing the Automatic Fuel Pricing Mechanism (APM) to avoid hidden liabilities. IMF data shows that fuel liabilities had risen to nearly K1 trillion in 2025.
Beyond macroeconomic adjustments, the brief highlights the need to strengthen trade performance and economic resilience through structural reforms.
Ministry of Industrialisation, Business, Trade and Tourism spokesperson Patrick Botha said Malawi is already taking steps to improve trade under the African Continental Free Trade Area (AfCFTA).
“As a country, Malawi is undertaking various initiatives to advance the AfCFTA agenda,” he said.
Botha cited the launch of the Dedza–Calomue One Stop Border Post with Mozambique as a key initiative to reduce clearance times and improve border efficiency.
He also said the government is rolling out the Malawi National Single Window, an electronic platform designed to reduce the time and cost of processing trade documentation.
In addition, the government is implementing coordinated border management to streamline processes and reduce the number of agencies operating at border posts.
Botha said Malawi has also undertaken targeted trade missions to countries including Angola, Mozambique, and Kenya, aimed at opening new markets for Malawian products.
“These missions provide a platform where stakeholders have negotiated contracts and will begin supplying under AfCFTA in the next quarter of 2026,” he said.
Meanwhile, consumer rights advocates have warned that global fuel market disruptions could have immediate effects on households.
Consumer Association of Malawi executive director John Kapito said the escalating conflict in the Middle East poses serious risks to fuel supply and pricing.
He cautioned that disruptions to global supply routes and petroleum production could push up landed fuel costs in landlocked Malawi if the conflict escalates further.
He said while rising prices are unavoidable, failure to adjust pump prices in line with global trends could create worse outcomes, including fuel shortages.
“Consumers will have to bear these price increases. In the past, failing to pass on these costs created fuel scarcity and debt, which ultimately affected consumers more,” he said.
Kapito also warned against expectations of government subsidies, arguing that such measures often lead to indirect costs through increased taxation.
