The gap between the official dollar rate and that on the parallel market is now at K2,249, as the dollar trades at about K4,000 on the black market. This represents a 128 percent spread and is emanating from acute forex scarcity in the country. But the Reserve Bank of Malawi (RBM) says addressing the scarcity requires concerted efforts.
A desk research by The Daily Times found that the official exchange rate has been fixed since April 2024, a decision the IMF says has largely erased the benefits of the November 2023 devaluation.
That devaluation, which set the local unit at K1,700 per dollar, was widely seen as a condition Malawi had to meet ahead of securing an IMF Extended Credit Facility (ECF) programme. A further adjustment followed in May 2024, after which the rate was frozen. However, the freeze has not stabilised the economy as the 2023 ECF arrangement was automatically terminated in May 2025 after eighteen months without completing a single review. International reserves remained critically low, covering less than two weeks of imports, while inflation rose to 32.3 percent in 2024.
The black market rate has, over the years, also fluctuated from around K3,000 in November 2023 to a high of K5,000 to a dollar in February 2025, before stabilising at the current rate of K4,000. Economist Marvin Banda warned that fixing the official exchange rate without addressing the underlying structural weaknesses has proven futile.
“The parallel market only exists because of inefficiencies that have plagued the system, which is why currency realignments or devaluations have always led to currency chasing,” Banda said. Malawi School of Government economist Francis Thauzeni said the official exchange rate is clearly unrealistic given the country’s chronic forex shortage and barely two weeks of import cover.
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In an interview, RBM spokesperson Boston Maliketi Banda said addressing the forex woes requires expanding productive capacity and boosting export earnings.
“…in this regard, practical exportoriented initiatives being championed by the private sector, complemented by the enabling environment and reforms under the National Economic Recovery Plan, are critical to strengthening forex inflows, reducing market distortions, and supporting long-term economic resilience,” Banda said.
