Forex Crisis Bites: $315 Million Salima–Lilongwe Water Project Choking on Dollar Shortages

Malawi’s worsening foreign exchange crisis is no longer an abstract economic statistic — it is now choking one of the country’s most critical infrastructure projects.

The $315 million (over K500 billion) Salima–Lilongwe Water Supply Project, designed to pump 50 million litres of water daily from Lake Malawi to the capital, has been crippled by persistent forex shortages that have created severe cashflow constraints and stalled progress for three months.

Finance Director for contractor Khato Civils, Pride Phiri, did not mince words: the project has struggled with funding shortfalls since January, largely due to difficulties in accessing foreign currency needed to pay for imported equipment and materials.

“The resources are coming slowly and without certainty. That has a significant impact on our completion timeline,” Phiri said during a site visit by the Parliamentary Committee on Natural Resources and Climate Change.

The reality is stark. The project is only between 33 and 36 percent complete — and it has now entered its most capital-intensive phase. This stage demands heavy financial outlays, especially for imported machinery and specialised components that cannot be sourced locally. Without dollars, progress slows. Without progress, timelines collapse.

The project is jointly financed by the contractor and the Malawi Government. So far, government has disbursed about $80 million sourced from local commercial banks, while Khato Civils has injected approximately $60 million of its own funds.

But even with this injection, the forex squeeze is tightening.

Parliament in April 2023 authorised government to borrow K105 billion — then about 30 percent of the project cost — from local commercial banks after the devaluation of the kwacha. Yet the devaluation itself worsened the forex pressure, inflating the cost of imported materials and stretching the project budget even further.

The Salima–Lilongwe Water Supply Project, launched in 2015 and implemented by a joint venture between Khato Civils and South Zambezi, involves construction of a 130-kilometre pipeline from Lifuwu in Salima through Dowa to Lilongwe. It is a flagship initiative meant to permanently solve water shortages in the capital.

Now, it risks becoming another casualty of Malawi’s fragile forex system.

Committee chairperson Tiaone Hendry acknowledged the gravity of the situation, pledging to lobby for increased funding to protect what she described as a massive and strategic national investment.

“The project is massive and a lot has already been invested. It needs to be completed. It started some time ago and it should not stop now,” she said.

But good intentions alone will not produce dollars.

The deeper question is this: how many more national projects must stall before Malawi confronts the structural roots of its forex crisis? From fuel to medicines to infrastructure, foreign exchange shortages are steadily suffocating development.

The Salima–Lilongwe water project was supposed to secure the capital’s future water supply. Instead, it now exposes an uncomfortable truth — without sustainable forex inflows, even the most ambitious national dreams can run dry.

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