An announcement by the authorities to start selling cheap dollars to some sectors of the economy has knocked down demand on the forex black market, with the dollar slumping from an all-time high of K5,000 last week to around K3,000 at the weekend.
Last week, government officials announced that the Reserve Bank of Malawi (RBM) would support some critical sectors such as the importation of second-hand clothes and cooking oil with cheap dollars as one way of curbing the sharp rise in consumer prices.
A number of black-market operators told The Daily Times at the weekend that since the announcement was made on Tuesday, demand for dollars has significantly receded, forcing black market rates to tumble.
Other players said the flow of tobacco dollars ahead of the next marketing season had improved liquidity on the formal market, where the greenback is offered at the official rate.
RBM Governor Macdonald Mafuta Mwale Sunday said while the central bank does not comment on unregulated and illegal developments, the true value of the currency remains that at which real and the majority of Malawians can afford to buy at.
“Those participating in this market are indulging themselves in economic sabotage that must be dealt with, for it is a major cause of our suffering as a country due to its inflationary pressure and its badly affecting the lives of our people.
“In Malawi, everybody must do business legitimately; that is, to be within the laws of the land so that we prosper together and protect vulnerable Malawians. If you can’t open a bank, go open a bureau and if you can’t open a bureau, find something else to sell, not money,” Mafuta Mwale said.
The central bank Czar said RBM was pleased with the support and participation of the general public in reporting those indulging in the malpractice, a development he said led law enforcers to do their job.
“This only shows that people of goodwill and those who love Malawi are tired of being reaped by these malpractices.
“I, therefore, encourage all [people] to come forward and continue reporting [suspects] to law enforcers. Together, we will redeem Malawi,” Mafuta Mwale said.
Financial Market Dealers Association President Leslie Fatch said the apparent recent drop in exchange rates spoke to two fundamental issues which were also highlighted when the rates were reported to be high.
“The first issue is market dynamics, where we have for a long time lamented the imbalance, where demand outweighs supply.
“The second issue is speculative tendencies due to the heighted shortages since December 2024, when a new regulation was introduced, which took out the already limited supply in the market.
“So, the announcement, once implemented, addresses the supply challenges but more importantly, the potential for supply affects hoarders and speculators, hence the apparent drop in the parallel market rate,” Fatch said.
He added that considering that Malawi’s key challenge had been the supply of foreign currency, any decision that positively affected forex liquidity in the market was a positive development, “which eliminates the panic and speculation we have noticed recently”.
“Key though is sustainability and efficiency of such initiatives as was announced by government. We hope the allocations will prioritise critical productive sectors of the economy and not the consumptive sectors which will continue to put pressure on the currency.
“Nonetheless, we applaud the government for the decision to inject the foreign currency, which has been in short supply since the introduction of the new regulation,” he said.
Economics Association of Malawi (Ecama) President Bertha Bangara Chikadza said it had to be noted that much as the country was experiencing liquidity problems, in terms of foreign currency, the extent of the problem was not as it had been perceived, with much of the amplified extent coming out of speculative and greedy behaviour by unpatriotic people.
“We can agree that forex is not available in the formal market but a few big arrests in relation to forex and implementation of the necessary controls to the trading of forex is bringing the change in the black-market rate.
“We have seen some individuals taking the forex they were hoarding to the bank. If this can continue, forex will be available in the formal financial market to be accessible by every Malawian [who is] in need of it. And if this continues, the black-market rate will continue on its downward spiral until it equalises with the formal market price,” Chikadza said.
She said inaction by the authorities over the past months plunged the country into problems and fuelled speculative behaviour.
“If the fiscal police were doing their job diligently and patriotically, and politicians stop meddling in these issues, and once anyone found involved in these crimes of economic sabotage gets jailed as required, the economy can be on track to recovery very quickly than anticipated.
“It is disheartening to be hearing that even [the] authorities who are supposed to guard the economy with all what they have are the ones involved in this behaviour because they know they cannot face the law and be punished,” she said.
Chikadza said Malawi could learn from South Africa on how to trade forex.
“Even banks do not buy forex from travellers unless you are holding an account with them. You literally find no one selling forex like we do here. It is all about the law acting as it was supposed to act.
“We have laws which do not get respected because they are being broken by those who feel they are above the law itself. It is a duty of every well-meaning Malawian to bring sanity to the economy.
“The justice system should be working, the police should be working to enforce the law and these should work hand-in-hand with the RBM to prosecute thoroughly those found in the wrong,” she said.
Chikadza added that Malawi needed laws that could polish up the way foreign exchange bureaux operated in Malawi.
“Bureaux have the mandate to buy and sell forex at any price, and this is where speculation starts from. We need special laws regulating these and aligning their mandate to the country’s macroeconomic plight,” she said.
Presenting the 2025- 26 national budget in Parliament on Friday, Finance Minister Simplex Chithyola Banda said the authorities would establish sustainable sources of generating foreign exchange, including direct participation of the banking sector to work with private sector players that have export potential.
He also cited the diversification of bank loans to productive and growth potential sectors of the economy as key to the process.
He added that authorities would establish a national anti-forex crime unit to tackle parallel market activities and ensure compliance with forex regulations.
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