The World Bank has raised the alarm over problems in how the Reserve Bank of Malawi (RBM) handles foreign currency, saying it is causing huge losses, more debt, and higher prices for everyday goods.
According to the Bank, RBM's operations in the foreign exchange (forex) market have put the central bank in trouble. To cover the losses, government has had to inject money into RBM using promissory notes, which adds to Malawi's domestic debt without creating new productive investments.
The losses are massive. In 2024, RBM lost K708.7 billion, up from K200.4 billion in 2023. Over the past five years, the Bank reports that RBM sold more dollars than it bought, resulting in net sales of $600 million (about K1 trillion). Selling at overvalued rates has led to an estimated total loss of K481.7 billion in that period.
As of March 2025, the stock of promissory notes held by RBM stood at K660.5 billion, partially offset by dividends of K344.1 billion that should have gone to government revenue.
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The problem is worsened by a big gap between official exchange rates and the parallel market, where dollars are sold illegally at much higher prices -- in some cases over 150% more than the official rate. This gap pushes up the cost of goods and feeds inflation.
Economists warn this creates a vicious cycle. Christopher Mbukwa, an economics lecturer at Mzuzu University, says RBM's actions lead to more debt, limit spending in important sectors, and worsen forex shortages, which then drive up commodity prices.
Velli Nyirongo, a Malawian economist based in Scotland, says selling dollars at inflated rates weakens government credibility, widens the real deficit, and undermines RBM's independence. It also fuels speculation in the forex market and makes inflation worse, creating overall economic instability.
Businesses are already feeling the pain. A recent survey by the Malawi Confederation of Chambers of Commerce and Industry shows that forex scarcity is the biggest challenge for businesses, followed closely by inflation. Without urgent action, the survey warns, high costs, lack of dollars, and unstable markets will continue to hurt companies and slow economic recovery.
RBM has tried several interventions to manage the crisis. Since 2022, it has adjusted export conversion rates, reduced the percentage of revenue exporters must bring back to banks, introduced stricter import verification rules, and tightened controls on NGOs and importers to reduce informal forex use.
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But economists say these measures alone are not enough. Without better planning, transparency, and market reforms, Malawi risks continued losses, higher debt, and even worse prices for ordinary people.
In short, the World Bank warns that Malawi's foreign exchange crisis is draining resources, fueling inflation, and threatening economic stability, and urgent action is needed to prevent things from getting worse.
