The Reserve Bank of Malawi (RBM) reports that Malawi’s total foreign reserves increased from $530.9 million (2.1 months of import cover) to $570.6 million (2.3 months) in January due to higher exports and reduced imports.
According to RBM’s January Monthly Economic Review, total foreign exchange reserves, including gross official reserves and forex deposits in commercial banks, grew by 7.47 percent from December 2024 levels. However, this is still slightly lower than the $574.8 million recorded in January 2024.
Despite the increase, the reserves remain below the 3.9 months of import cover recommended by the World Bank and IMF for import-dependent economies. Businesses continue to struggle with forex shortages, limiting their ability to import essential goods.
Local entrepreneur Martha Nyirenda, founder and managing director of Chindikani Investments, said small and medium enterprises (SMEs) face delays in securing forex from banks, affecting their operations and customer confidence.
At a recent business meeting between local importers and Indian exporters, Indian businesses expressed concerns over payment delays due to forex shortages.
Meanwhile, Malawi’s trade deficit improved from $250.3 million in December 2024 to $187.2 million as export earnings from tobacco, tea, macadamia nuts, and rubber rose by 33.7 percent to $86.4 million. However, the trade gap remains wider than the $184.8 million deficit recorded in January 2024, highlighting persistent forex challenges.
RBM maintains that Malawi has sufficient forex reserves, but much of it is tied up in the informal market, where the dollar is traded at around K4,000, more than double the K1,750 rate at official banks.
In response, authorities have cracked down on parallel forex traders with support from fiscal police, leading to a temporary reduction in the informal exchange rate to K3,300, though it later rebounded.
Economist Velli Nyirongo, based in Scotland, emphasized the need for boosting exports and reducing import dependence to ensure sustainable forex reserves, warning that without structural changes, Malawi will continue facing cyclical forex shortages.
