Malawi’s total foreign exchange reserves averaged 2.2 months of import cover in 2024, falling considerably wanting the internationally really useful three-month threshold.
This persistent sub-optimal reserve stage raises questions concerning the nation’s financial vulnerability and potential challenges in managing worldwide commerce and monetary stability.
A Malawi Financial Market Update for the week ending February 28 2025, printed by Bridgepath Capital Limited, exhibits that, in January 2024, complete reserves stood at $576.70 million (2.3 months of imports).
In February, the foreign exchange reserves took a slight dip to $540.32 million (2.2 months of imports), signalling early indicators of financial stress.
The reserves registered a peak in April, reaching $603.07 million (2.4 months of imports), representing the best stage.
By October, reserves had fallen to $519.0 million (2.1 months of imports) earlier than a slight peak to $530.9 million (2.1 months of imports).
A Monthly Economic Review for December 2024, printed by the Reserve Bank of Malawi, exhibits that official reserves have been recorded at 0.6 months import in December.
In an interview on Wednesday, economist Exley Silumbu stated the overseas change problem had grow to be perpetual.
“If you look across the board, the resources of foreign exchange earnings have not been really satisfactory in order to relieve the country of the foreign exchange constraint,” Silumbu stated.
Another financial knowledgeable Velli Nyirongo stated Malawi’s overseas change reserves in 2024 revealed a precarious financial place.
He stated the fluctuations highlighted financial volatility, culminating in a regarding low of 0.6 months of import cowl by December.
“This persistent deficit indicates a substantial trade imbalance, with imports consistently exceeding exports, placing continuous pressure on the Kwacha.
“Critically, low reserve levels constrain Malawi’s ability to withstand external economic shocks and finance essential imports, potentially leading to supply shortages and inflationary pressures. Furthermore, forex shortage hinders private sector growth and foreign investment, impeding economic development,” Nyirongo stated.