Persistent foreign exchange shortages are threatening business operations and could increase loan defaults among import-dependent firms, the Reserve Bank of Malawi (RBM) has warned.
The warning comes amid continued foreign exchange pressure, with the country’s total forex reserves recorded at $616.3 million in June 2026, equivalent to 2.5 months of import cover, below the recommended three- m o n t h benchmark.
According to the RBM’s June 2026 Financial Stability Report, published this month, further pressure on foreign exchange availability is expected following the conclusion of the tobacco marketing season, amid constrained capital inflows and the possibility of reduced foreign aid.
The central bank said import-dependent borrowers are particularly vulnerable because foreign currency shortages could limit their access to raw materials, weakening their operations and capacity to repay loans.
“Import-dependent borrowers face a shortage of raw materials, disrupting operations and raising the risk of loan default,” the RBM said.
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The RBM also warned that elevated public debt and foreign exchange shortages continue to exert pressure on the exchange rate and trade balance, posing risks to economic growth and financial stability.
The warning comes against a subdued economic outlook, with real GDP growth for 2026 projected at 2.8 percent, down from an earlier projection of 3.2 percent. The downgrade has been attributed to persistent forex shortages, elevated inflation and weak performance in key productive sectors.
The central bank further said foreign exchange shortages were already affecting credit conditions, with banks expressing concerns over borrowers dependent on foreign currency.
According to the Bank Lending Survey contained in the report, covering January to June 2026, banks maintained tight lending standards amid elevated credit risk, increased risk aversion and concerns over borrowers’ repayment capacity.
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Bankers Association of Malawi President Philip Madinga said the forex situation remains dire and requires interventions aimed at increasing supply.
Madinga, however, said recent measures by the central bank to address the foreign exchange situation offer positive signals.
“We’re delighted to see some of the interventions that the Central Bank has made in terms of one, for example, the removal of the mandatory conversion of export proceeds. That’s a good signal, I think, to encourage FDI into the country.
“We’ve also seen some regulations in terms of FX trading, to make sure that the markets, their normal practices, or there is a direction in terms of how, for example, derivatives are priced and how banks are authorised to operate in terms of FX trading,” Madinga said.
He said the banking sector was also contributing towards strengthening the supply side of the economy by providing more capital to the private sector.
Manufacturers Association of Malawi president Gloria Zimba said the economic outlook and business performance remain gloomy as companies continue to struggle to access foreign currency.
“As usual, everybody expects that the tobacco season should be able to free up and open up the forex reserves for the country. Unfortunately, this year we’ve seen a very constricted market, where there was a high level of rejection. So that high level of rejection has affected the expected sales volume,” Zimba said.
She said most companies were projecting reduced sales volumes and revenue collection in the last quarter of 2026 and the first quarter of 2027.
“So, if there is no availability of forex, if revenue realisation is dwindled, it affects your planning for the future,” she said.
The tobacco market, which is expected to close on September 10, has recorded a 27 percent decline in volumes sold to 142.4 million kilogrammes (kg) from 197.2 million kg during the same period last year.
Revenue generated has also fallen by 43.5 percent to $282.5 million from $500.4 million at the 19th week of trading to August 28, according to AHL figures.
Meanwhile, the government is implementing measures aimed at improving foreign exchange availability, including gold purchases, expanding gold trading centres, combating smuggling and foreign exchange leakages, and operationalising the National Commodity.
