Kwacha weakens further, Inflation to rise: Malawi economy takes battering

Indications of a precarious economic situation on the ground continue to show with the country’s currency, the Kwacha facing steep depreciation as some foreign exchange bureaus and commercial banks selling the greenback at K530 this week against the globally strong U.S. currency.

Malawi Kwacha facing steep depreciation

Malawi Kwacha facing steep depreciation

Malawi Kwacha

Malawi Kwacha

Reports indicate the Kwacha is at risk of renewed weakness after it  sharply lost its value against the dollar in November last year when it hit K520.

Published daily foreign exchange bureaus rates by Reserve Bank of Malawi dated July 14 2015 show that most bureaus were selling a dollar far between K500 ($1) and K530 while as of yesterday most ADBs were officially selling a dollar at around K470.

Lilongwe-based Golden Foreign Exchange Bureau was buying a dollar at K485 and sold the same at K530 while Midland Forex Bureau was selling a dollar at K525 and bought the same at K485.

According to The Nation newspaper, on black market or in the streets of Lilongwe, dealers were selling a dollar at K525 and bought the same at a range of between K505 and K510.

The paper noted in its report that the weakening of the currency is in sharp contrast to the high levels of foreign currency the economy is sitting on, cumulatively at $1 billion ($500 billion) as at July 13 2015. This is a combination of gross official reserves, held in the custody of the Reserve Bank of Malawi (RBM) to prop up the kwacha, estimated at $724.29 million, or 3.47 months of import cover, and private sector reserves in commercial banks at $292.4 million, or 1.4 months of import cover.

Recently, Minister of Finance and Economic Planning Development Goodall Gondwe conceded that the country is going through turbulent times.

Speaking during a breakfast meeting organised by the Association of Early Childhood Development in Malawi (AECDM) to lobby for more funds towards early childhood development, last Wednesday, Gondwe said the economy is in “bad” shape.

Meanwhile,   Nico Asset Managers Limited, has forecast that the inflation rate will remain high, triggered by soaring high cost of food and low maize output.

In its June 2015 monthly economic report, the Blantyre-based investment advisory firm, said: “Inflation is expected to remain elevated, as a result of the rising food prices from lower than expected harvest and recovering global oil prices.”

Malawi’s headline inflation rate—the rate at which the general level of prices for goods and services rises—now stands at 19.5 percent as at May 2015, a 0.7 percentage points increase from 18.8 percent in April 2015, according to National Statistical Office (NSO).

University of Malawi economics proffessor Ben Kalua said the situation is worrisome.

“This reflects the dynamics of supply and demand and there are concerns that banks are not as responsive to demands of the market. So, the currency is getting weaker as there have also been aid flow problems among others” said Kalua.

Former economic planning minister Ralph Jooma has said radical changes are needed to revive Malawi’s economy, which is in bad shape and requires a fresh approach.

Jooma said inflation “will not be as low” and that the exchange rate “will not be as stable.”

He said: “Interest rates will remain high and industry capacity utilization will subdue and therefore hamper economic growth because the economy will not be able to produce the projected goods and services. This is the reality.”

An economic observer told Nyasa Times that although DPP had “rigged the May20, 2014 election, it will not be able to rig the economy”.

He observed that the majority of the country’s leadership was more interested in political expediency rather than pragmatic bread and butter issues.

To restore Malawi’s position on a positive economic growth path, he suggested an investment is needed which calls first for investor confidence and security.

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55 thoughts on “Kwacha weakens further, Inflation to rise: Malawi economy takes battering”

  1. Samarakunjuta says:

    May the majority suffer more than the minority!!because they are the ones voting shit when it comes to elections.Now that we are quite without doing anything to the government lets see if the majority will do to fix things in Malawi.Too much mapwevupwevu MWEEE!!!

  2. pat says:

    This is July. Those with ears were told about this before it happened. Watch if there is any economy in the world which grew in July. God’s word must come to pass alway

  3. Stanly Nkunika says:

    The problem is that Malawians are very soft that we allow politicians eded by our noble courts to manipulate the views and decisions of we poor Malawians.And here we are,sitinati tilira.

  4. chintotho says:

    Vuto la Malawi si ATSOGOLERI Koma asankhi. Asankhi sititha kusankha. Timasankha titakwiya ndiye timangotola ziri zonse.

  5. manix mike mvula says:

    malawians lets wake up from the slander lets emulate what the egyptians did by toppling the head if it is not delivering komanso tichepetse kuba amalawi

  6. dwight msiyeni says:

    A Mbendera mamina mkati mwausiku.He begged Malawians to listen for three times not knowing he was selling us to thieves.He cried heavily like a chicken in the midst of night not knowing he was giving a raw deal of mbyofo mbyofo.

  7. zk-abc says:

    Serious times – end times! Tingoti phee tione.

  8. Welewo alukundu says:

    Koditu uproffesor winau tidziuonetsetsa.Azungu amangopeleka ma degree kwa anthu oti luntha mulibe, bola akulankhula chizungu coz of kukhalitsa maiko achizungu.
    I know this guy, he can not deliver!!!.

  9. Dr.prof.nyada says:

    Palibe chimene tinapindula ndipo tipundule ndipo tizapindula ndi boma limeneli check this space.

  10. Eliam says:

    Yoooo! Guys let’s stop trusting these fucked up politicians. I’m tired now. They r missleadin us. Political parties lyk DPP, UDF & PP we shouldn’t vote them again into power they r full of thieves. U armed robers why udnt attack these crooks. Eeeeeish! Idnt where we r going? We r lost.

  11. Ophiri says:

    No wonder they want to print K2000 notes, followed by K5000. Malawi, my Malawi!

  12. Richard. Banda says:

    Country 2small but 2much politics.U reporter,so called political analists(naonso afuna cashgate)cregymen.should we elect u will u perform(zimakoma ukamaonela).Someof u better die 4 a better malawi.Please we are tired of pullhimdown syndlome.

  13. Tili Chenene says:

    The problem us with THESE ONES who promise us moon. Everybody knew the Kwacha was fragile.

  14. Malawi a failed nation says:

    Dear All Readers,

    We have been, we are & who ever continues living in this failed nation will never manage his once life given live in peace & harmony.

    Every person in gov has been is and always going to look after its interest no one especially the top guns no.1 no 2 and all the rest will be just enjoying the constitutional rights with vvvip service to live in palaces servants top noch cars and not forgetting model body guards who can only be good in bed not in security.

    “THIS IS A DOOMED NATION” – WE HAVE GONE BACK IN THE RECENT OLDEN DAYS.

    WE BLAMING JB BUT DID WE EVEN THOUGHT FOR A SECOND THAT WHEN LATE BINGU DIED JB TOOK OVER THE NATION AND WITHOUT ANY MUCH DOING (ONLY LEAVING THE CURRENCY TO FLOAT) SHE DID NOTHING!!!! BUT THINGS JUST FELL IN PLACE.

    NO FUEL LINES NO FOREX PROBLEMS AND INFACT 2013 SEASON MWK WENT DOWN FROM 460 TO 325.

    Mutharika name is not a lucky name and blended with bad policies and looting program you can’t expect anything good out.

    GUYS EMBRACE A TOUGH TIME. I HAVE GIVEN UP HOPES OF ANY GOOD FUTURE.

    MY FOOT!!!! GOV ARRANGES A INVESTMENT FORUM WHEN THE COUNTRY IS DOOMED. THOSE STUCK IN THE MUD CALLED MALAWI GOV IS TRAPPING MORE PEOPLE TO ADD IN THE MUD.

  15. Dr Mbewe says:

    Peter cannot manage this country economicall nor can he articulate economic ideas for the country. TbiThis idiot is simply blank abd clueless.

  16. Zondiwe says:

    Joyce Banda only finished Bingu’s remaining 2 years in office.
    Even if she wanted, she could not have caused all the problems we are facing.
    Have Malawians already forgotten Bingu’s arrogance? He quarreled with almost all our neighbours, and added the British government.
    Bingu even quarreled with Mozambique, the country that he claimed his ancestors came from. Even the so-called Cashgate was perfected during Bingu’s time.
    The trouble with our small country is that more than anything else, people are steeped in regionalism and tribalism.
    Our main problem is the increasing population, and lack of jobs for our youth.
    Government should re-introduce vocational training for our youth through MYP-like Training Bases. Call them a suitable name, and please engage the idle youth who are currently engaged in drinking, smoking as well as breaking into innocent peoples’ homes with pangas and violently robbing them of their hard-won property. Often, people are injured and killed.
    Instead of issuing general and repetitive statements, government can embark on specific acts that will directly impact the populace of Malawi. If this is done, one will immediately see a real change in the economic activity of our country.
    Government could encourage the setting up of large commercial farms that could grow for export, rather than leaving this activiti in untrained and under-capitalised subsistence farmers. The youth trained as specified above could be employed on these farms, etc and would produce directly for export. We will then not be complaining of forex shortages and depreciating currency. We could specialise in the efficient production of Kilombero, and other chosen crops, on a very large scale, and export the bulk to earn the much needed forex.
    This is the debate that should be taking place in our country, and not always about new political parties, unanimous declarations by sitting presidents to stand in an election that is 4 years away, etc. We need to be practical as a nation.
    Please Malawians, add or subtract from this discussion. I am tired of seeing our youth sitting at street corners in our cities, pretending to do ‘nothing’ when they are really dealing in illegal drugs, they are laundering money, etc. They are sitting at these street corners for years on end!
    We need to have a producing economy, while we are improving our Service industry. We cannot ignore the important things in out economy. We were all very happy that the armed wing of the MYP was taken out, but we did not discuss its replacement for over 20 years. We have wasted a lot of time indeed, and in the meantime, our population has swelled to around 16 million in 2014, from only 3 million in 1964. This is the unique problem for Malawi, as you will not hear about this issue in our neighbourhood. They all have huge countries, while we have a very small and overpopulated country. Even Botswana has around 2.5 million people only for such a huge land mass. Our contemporary are Rwanda and Burundi, but they are so far away from us that we hardly speak about them. Most ordinary Malawians in our rural areas have not even heard about Rwanda and Burundi. Led by government and our eloquent citizens from the academia and other areas of our economy, who seem to specialise in politics, let us turn our attention to our real problems and how we can start to address them.

  17. ZZ says:

    LET ECONOMISTS COMMENT

  18. Phaghlani Vwavwa says:

    whenever Charles Tchuka is at RBM the economy performs poorly because he wants to follow economic principles by the book. fire the the guy and get someone who understands how to manage an African economy like ours. Tchuka is unfit to be at RBM. Trust me

  19. Rodgers Banda says:

    The economy back to Bingo. No forex no fuel no food. More imports than exports. The country is doomed. Ministerial and presidential palaces filled with foreign currencies. Malawians left gnashing teeth. The confused crying DPP wooye!! 2025 wooop!!! The result of choosing a loser.

  20. Professor Dr. James Napwiri Phiri says:

    DPP ndi yolephera koma inu wosamva

  21. Bola Kwimuka. says:

    The whole SADC Region is in a mess. All our currencies fell sharply against the Dollar. I wonder, it might be beyond our control as a country.

  22. mpimpa says:

    mumayesa phada

  23. nyapala nyaphaphi says:

    amalawi mukudabwa chani? mwayiwala kuti boma linabwereka USD300 kuchokera ku Mota Engil and its payable by tobacco proceeds within this year? it means our peak season was in February. komanso dont forget kuti paja alimi akamagulitsa fodya timagwetsa kwacha kuti tiwabele bwino kenako tikagawane kunyumba yaboma.

  24. el- Chapo(small in stature. big in mind ) says:

    Mbofyo mbofyo economist combined with professor of dome is equal to a failed government.

  25. tsetsefly says:

    Can this Mapwevupwevu President address the nation. Does he have any clues how economies are run? Just waiting for the right time to chase the he goat out of the statehouse. Tichita kuthamangitsa. The old adage, mwana akalilira nyanga ya msatsi msemela imufotera yekha. For a long time people warned the nation that this fake professor does not know anything about running gvt affairs. He failed a ministry and some boot lickers entrusted him with a nation. Worst things are yet to come, just wait.

  26. ben says:

    The problem is the new RBM rule allowing exporters to keep 100% of the export proceeds for unlimited period, they should change back to 40% immediate conversion to Malawi kwacha and 60% they can keep for 3 months, this way kwacha can be stabilised as the moment exports are hoarding i can see the rate going to 600Mk to 1 us dollar if this policy is not reversed. Exprots are important but even imports are neccessary so there is a need to balance from RBM instead of taking extreme measures to benefit only 1 side of the people.

  27. thinktankmalawi says:

    why cant you appreaciate that the kwacha has been stable for some time…..that was not worthy news because it was positive…..when troubled times approach that’s news…..sad

  28. mwahana says:

    This nation lacks serious, innovative managers. Just imagine the government bans use of thin plastics to protect the environment then manufacturers threaten to lay off employees and warn government in losing MK10 billion in tax. Is there any sense in such a response?????? Why not manufacture plastic carriers of recommended size????? What value is MK10 billion in contrast to environmental degradation??????? and why lay off employees???? Do you celebrate when humans suffer????? These Asians have no love for this country.

  29. Boma! says:

    Satana weniweni peter, kwake ndikuba, kupha ndi kuwononga

  30. Baba wa boy says:

    Malawians are very strange people!!

    Money is a commodity like any other, when it is in abundance it is cheap, when it is scarce it becomes expensive.

    How does money become scarce? Money becomes scarce when a lot people are demanding it, We in Malawi demand the Rand nearly everyday, so we ensure the strength of the Rand.

    Currently there are people that are demanding the Malawi kwacha to buy tobacco, that helps the kwacha to be a bit scarce, but apart from Tobacco, what else do we have that others would want from us? NOTHING!!

    Maize, ground nuts, all food crops, we eat them ourselves, or we sell them on the black market, then turn round buying what we sold.

    Malawians are individualistic all we think about is me,me,me.

    The Kwachas weakness, is the weakness of the economy, the economy of a country is the population of that country, not the Government.

    The job of government is to manipulate, certain things within to advantage its economy. Malawi did that and the currency gained power, what we should have done was to import factors of production such as raw materials, to use in producing goods to sell outside the country, thereby strengthening the currency. (Fertilizer is a raw material)

    But what did Malawians do, imported useless finished goods, Juices,yogurts,Wines etc, things that cause a depreciation of the currency. Them we turn round and blame Government.

    Things like Theba, used to buoy the Kwacha, but Malawians would not know that, so dull. I would go as far as saying train prisoners as soldiers, and flog them.

  31. masa masina says:

    Remember that Malawi is one of the poorest countries in the world. We are a nation that consumes more but produce less. We import more and export less. We make less forex but spend more buying goods from other countries. People that get rich in Malawi do so through cashgate. We have failed to build a stable economy because we are a society that is over dependent on donors and tobacco.

  32. Zondi says:

    Malawi will only going to develop if we have positive and selfless minds when Malawi Kwacha was gaining there was no reporting now it is depreciating its news…..credible news should be balancing mind you we have the cream of economics at Finance Ministry led by Dr Goodal Gondwe and PRO Nelson Msowoya

  33. Keyboard Speaker says:

    Tha doesn’t come as a surprise, it’s as a result of dubiously halted exchange rate by the loaned forex in the name of “currency swap deal” initiated by mbofo mbofo Goodall Gondwe and his proffessor of doom.

    so you can imagine the kind of inflation and suffering expected when our currency is loosing ground in the face of tobbaco sales. At the same time we have to import nearly all our needs, I mean including maize due to roaming hunger.

    Elections can be rigged, but economy can’t, we can lean from Greece that endevoured to hold their economic doom but time has caught up with them and they now face tougher austirity than the one they deserted.

    So it’s a fact that our economy still has affinity for donors and donors are in cold blood with DPP and the Muthalikas government. As long as these remain in power, Malawi shall see no economic stability. Donors will keep dogging us in the name of waiting for financial reforms while in reality they still hold grudges against the back door regime.

    we can ran, we can hide but we can’t escape the consequences of rigged elections and maladministration of Muthalikas.

    The ball remains in our court untill something is done.

  34. Mwana Mai says:

    Kodi paja kuti tigwiritse ntchito Internet mpaka abwana achoke kaye mu office. It pays to at times follow what is going on in other countries and after doing so then you can make all the noise you wish to make. You mean you have already swept under the carpet that the same Joyce Bandai you are mentioning is the root cause of the current situation in the country? What do you think she is using to foot the bills being incurred wherever she is after openly complaining that the current government is not paying her as a pensioner? This is just a matter of crossing the TEE’s and dotting the I’s. At the rate we are going, Malawians should learn to live within their means. You don’t expect to spend K100,000.00 when your remuneration is pegged at K90,000.00 in very simple arithmetic it means you have a shortfall of K10,000.00 Now where do you think will cough out the remaining cash, Azungu kapena – omwewa akulephera kuthandizana okha-okha? It is a pity that every time someone tries to suggest a simple solution to mitigate our situation, we rush to shoot down the ideas without even bringing up an alternative. With such type of mentality, no matter who comes in as a leader the trend will remain the same because all we are waiting for is foreign assistance, which unfortunately won’t be found when you look at the current global financial order.

    1. Galu Wapananji says:

      So the sharp depreciation is due to Joyce Banda staying abroad? Really? When Goodall was boasting in Parliament about stabilising the Kwacha ‘through a trick’ was Joyce Banda staying in Balaka? Should JB only be remembered when things go wrong? Do you really expect to keep blaming Joyce Banda for the remaining 4 years?

      Granted that Joyce Banda messed up, but we must accept that after more than one year in power the APM administration should have gotten to grips with the situation by now. Why are they still failing to regain donor confidence? Are they perhaps spending too much time partying (to the extent that they want to build 2 banqueting halls – one at Sanjika and the other at Kamuzu Palace) that they don’t find time to do the needful?

      Those Malawians who voted for APM did so hoping that APM would correct JB’s mistakes – and not that he would continuously use them as an excuse…

  35. Ollah Amagents says:

    Ziliko nkulinga utapisako. Wadzionera yekha nyapapi.

  36. Ken says:

    We are really doomed. Why is this happening at the time when we are still selling tobacco at Auction Floors. The govt must lock all loopholes to avoid wastage of resources. However,I dont think the duo of Peter and Saulos can manage to stop massive plunder of resources in govt.

  37. zachepa says:

    Am worried as we are still in the season of selling green gold. so what will happen after the selling period is over. May Mr President and his cabinet look in to this please.

  38. mtumbuka1 says:

    Mapwevupwevu government,you stole votes to run the country so here we go!

  39. Phiri says:

    God Have mercy on us. We can not blame government only. What are doing to our country. Business people and Contractors are we not the ones who drove donors away with our cashgate under Joyce Banda Amalawi it is not Peter or Chakwera or Joyce who can help us Let us help ourselves by working hard. Give Peter time and support his policies.

    Who depreciated the Kwacha? Joyce
    Who drove Donors away because of cashgate? Joyce

  40. Steven gunde says:

    It will be worse than it were yesterday
    This life is like dat
    Nd it really doesnt matter who is ruling

  41. ujeni says:

    Why blame Goodall Gondwe, is he the one who rig the elections to be the President, Joyce Banda took the economy head on and corrected the wrongs Bingu had created, now Peter Mutharika all he is doing is mapwevupwevu, you will remember Joyce Banda mpaka kale kale. We don’t have security in this country and no investor will come in and that’s no secret.

  42. Eye Witness says:

    Bola ilooo!! Kkkkkk a failed Boma.

  43. The advert on MBC goes like this, The national Economic boom within months. So this is the reality of the national economic boom touted by the Mutharika Broadcating Corporation my foot. Misery on Malawians will grow higher.

  44. ASWILE says:

    Mwayonga mahara

  45. zonse ndi nthawi says:

    Bwelani mudzawone zili ku Nyasaland kubela chisankho ndikulephela kuyendetsa dziko. Malawi Savings Bank idagulitsidwa chifukwa simapindulila a Malawi ndiye tiyeni tigulitseso president chifukwa sakutipindulila.

  46. Alungwana says:

    APM and the DPP must be ashamed now and onwards.

  47. makito says:

    Very sad. Goodall Gondwe is a huge liability to the country. The Economist in him left long time ago, he remains with a political rogue that is demolishing the country at supersonic speed. Lord have mercy.

  48. sir bentby says:

    thus good news for us here in foreign

  49. Bololo Wa Chitumbuka says:

    I will not comment because I have taken too much Canabis Sativa!!!!! Kkkkkkkkkk, koma uyu kkkkkkkkk, ine ndiolemela! Ma presdent onse mu africa ndi anga! Ganja Gorvement its malawi!!!

  50. Mtumbuka says:

    Power Is Sweet!

  51. Wilhelm says:

    This is simply the effects of the foreign-exchange ‘swap’ that wasn’t ‘actually’ borrowing.

    The DPP government brought the rate down temporarily, to create the illusion of economic competence or good management.

    Now it’s simply coming due. They have to return the foreign exchange that they ‘didn’t borrow’ and we are returning to the same old cycle of sky-high exchange and inflation rates, and well-worn misery for the average Malawian.

    No matter. The ‘transformative’ government is creating community colleges! And holding endless investor ‘conferences’ and ‘forums’ that are securing billions in prospective deals.

    Happiness is just around the corner! Just let the politicians keep running the country for a few more years, keep giving them your votes, they’ll deliver eventually. After all, they did promise. And we all know politicians are honest people..

  52. kambwali says:

    Mwamukumbuka Joyce. … a Malawi kuyiwala nsanga

  53. White Rabbit says:

    An it’s only going to get worse, and worse, and worse!

  54. Kambina says:

    Ziliko…nkulinga utatosa…

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