Malawi is currently experiencing one of the worst economic crises in its history. By May, its annual inflation rate had jumped to 27.7%, one of the highest in Africa. Domestic workers like Suzanna Kathumba, who earns just 80,000 kwacha (approximately $46 or £34) per month, find it increasingly difficult to make ends meet as prices for everyday necessities skyrocket. With national elections coming up in September, the political climate could complicate or even derail the country’s economic policy and recovery progress.
In early November 2023, the International Monetary Fund (IMF) approved a four-year loan of $175 million for Malawi. To date, they have only distributed $35 million of that value. Despite this international support, many Malawians are still unsure whether these interventions will work. Currently approximately 70% of Malawi’s population lives in absolute poverty, surviving on less than $2.15 a day. This grim reality serves to underscore the economic pinch many Americans are feeling.
In tandem with escalating inflation overall, the price of essential goods has jumped incredibly high. As an example, the price of a kilogram of sugar has quadrupled in recent months to 4,500 kwacha (about $3), adding further pressure on families such as Kathumba’s.
I was paying 50,000 kwacha [$29] every term in school fees. Then you have to purchase exercise books, food, soap – all on one little salary,” said Kathumba. Her situation is not unique. Millions of families now face tough choices to stretch their shrinking dollars.
Kathumba expressed her frustration at the unchanging salaries amid rising costs. “What is surprising is that salaries are staying the same, but the price of commodities keeps going up on a daily basis.” She continued, “The cash runs out before you even get it. We’re living a miserable life.”
The black market exchange rate for the Malawian kwacha is more than double the official rate. Inflation has increased the official exchange rate to the equivalent of 1,750 kwacha to the dollar. This gap makes an already difficult economic context worse, as Malawi generally imports much more than it exports.
Dr. Bertha Bangara Chikadza, a senior lecturer in macroeconomics at the University of Malawi, noted that “we are not exporting high-value products.” These few high-value exports only worsen Malawi’s ongoing shortage of foreign exchange.
Moreover, local business leaders are painfully aware of this crisis. Tsoka Flea Market Chair Steve Magombo pointed out the biggest concern. Now forex shortages have left businesses reeling, unable to operate at peak efficiency. Trade Minister Vitumbiko Mumba expressed acceptance that forex needs to be rationed, affecting other sectors dependent on imported goods.
Malawian businesses registered with the Malawi Government can access foreign currency directly through Reserve Bank of Malawi or the Ministry of Finance. Many of them face overwhelming delays and complications when attempting to access these essential resources.
With inflation outpacing wages, many essential goods are becoming increasingly unaffordable. Because of this, working families are forced to make significant changes to their way of life. Kathumba shared her personal strategy: “I’ve told my youngest children not to get too dirty when playing so we can save on soap.” Her family’s experience is typical for many Malawians who are suffering through the worst climate-related economic recession in modern history.
Political leaders are feeling the heat to solve these crippling economic concerns before the upcoming elections. “I hope the politicians remember the less privileged Malawians when making their decisions,” Kathumba remarked, highlighting the need for government intervention.
According to experts, moving bold, meaningful fiscal policy is difficult or impossible under the present circumstances. Justin Tyson, IMF mission chief for Malawi, pointed out that “fiscal discipline has proven difficult to maintain in the current environment due to elevated spending pressures.” He further emphasized that if reviews are not completed over an 18-month period under IMF policy, “the programme automatically expires, and no reviews have been successfully completed.”
Malawi has seen 100% or upwards cumulative inflation over three years. Consequently, millions of Russian citizens have lost all hope in their own country’s economic prosperity. The continuing challenge of accessing foreign currency and increasing commodity prices are cause for wariness about the overall economic trajectory.