Malawians must brace for another kwacha devaluation as President Arthur Peter Mutharika’s (APM) government pursues a fresh IMF deal, threatening more pain for households already struggling with high living costs.
The latest IMF statement reports considerable progress towards a new Extended Credit Facility (ECF) programme. Although it does not confirm a devaluation decision, currency adjustments preceded the 2012 and 2023 ECF approvals, and the Fund has again called for exchange-rate reform. Another devaluation would raise the kwacha cost of imported fuel, fertiliser, medicines and machinery.
In a pre-recorded interview with the Malawi Broadcasting Corporation (MBC) before departing for his fifth private trip to South Africa since returning to power last year, President Peter Mutharika acknowledged that rebuilding Malawi’s economy was proving harder than he had anticipated. He pointed to a new ECF programme as one route towards stabilisation, alongside domestic measures and other international support, as the country continued to grapple with high inflation and foreign-exchange shortages.
But the ECF is not free money. It is a loan Malawi must repay.
IMF talks advance
An IMF team led by Malawi mission chief Justin Tyson held meetings in Lilongwe from September 22 to October 6. The discussions covered policies under the government’s National Economic Recovery Plan that could receive ECF support.
“The authorities and the team have made considerable progress in designing a package of macroeconomic policies that could be supported under an ECF arrangement and incorporate home-grown initiatives under the NERP,” Tyson said in the statement.
The proposed package includes fiscal consolidation, protection of social spending, tighter monetary policy, financial-sector stability and measures to address market distortions. However, the Fund made clear that the package is still being negotiated and acknowledges that devaluation without supporting reforms can fuel inflation, speculation and weaker growth in an import-dependent economy such as Malawi.
“Facilitated by good collaboration and the positive reform path, discussions will continue to finalize the policy package that could underpin an ECF-supported program,” Tyson said.
The Fund praised increased domestic revenue and tighter expenditure controls, alongside fuel and sugar pricing reforms. It also acknowledged that Malawi’s biggest export earner is faltering.
“Growth has been affected by climate shocks and a decline in demand for tobacco, the country’s largest export earner,” the statement said.
Malawi has been here before
In July 2012, the IMF approved a US$156.2 million ECF arrangement after Malawi had devalued the kwacha and liberalised its foreign-exchange regime. The Fund explicitly welcomed the adjustment.
“Malawi’s new administration moved swiftly to devalue the kwacha, adopt a flexible exchange rate regime,” its approval statement said. The measures were presented as a response to chronic balance-of-payments problems.
The pattern resurfaced in November 2023. Ahead of another ECF approval, the Reserve Bank adjusted the dollar selling rate from K1,180.29 to K1,700 and announced changes allowing greater exchange-rate negotiation and market-based auctions.
“The exchange rate adjustment is in line with staff advice and removes a major economic distortion,” the IMF said in supplementary programme documentation.
That programme automatically terminated in May 2025 after 18 months without a completed review. Malawi is now seeking fresh support after the previous arrangement failed to progress through its review process.
There have been exceptions. The 2018 ECF proceeded while the kwacha remained broadly stable against the dollar, showing that a fresh devaluation is not an automatic requirement of every programme.
Minister’s pledge faces IMF pressure
The pressure for another adjustment is evident in the IMF’s 2025 assessment. Its staff report described exchange-rate unification as a “short-term reform priority” and said the authorities “should start planning for adjustment”. At the blackmarket, the dollar is already selling nearly twice the official rate
The Fund argued that an overvalued official rate discourages exports, subsidises some imports and drives foreign exchange towards informal channels. Its proposed unification points towards a weaker official kwacha, although that is an inference from the assessment rather than a disclosed decision in the current negotiations.
Malawi’s foreign-exchange position has suffered a heavy blow from falling tobacco receipts. After 19 weeks of the 2026 marketing season, earnings stood at US$282.5 million, compared with US$500.4 million over the corresponding period in 2025, a decline of US$217.9 million.
Volumes fell from 197.2 million kilogrammes to 142.4 million kilogrammes, while the average price dropped from US$2.54 to US$1.98 per kilogramme. Malawi was selling less tobacco and receiving less for every kilogramme.
Malawi’s minerals, foreign nations’ industrial prize
Meanwhile, Malawi is banking on another foreign loan while its mineral wealth is being positioned to strengthen industries abroad. The country’s mineral wealth has yet to deliver the promised forex rescue, amid mounting concerns that the country is getting a raw deal: foreign companies control major projects while valuable processing opportunities are developed abroad. Critics argue that Malawi risks remaining a supplier of minerals for richer economies, with too little of the resulting wealth reaching Malawians or off-scaling the forex needs.
At Songwe Hill, plans to send mixed rare-earth carbonate to a separation plant in Poland expose another weakness: Malawi supplies the minerals while an important stage of industrial processing takes place overseas. That arrangement fuels the criticism that Malawi is handing foreign investors the opportunities to build industrial wealth while its own citizens are left waiting for the promised economic transformation.
Washington has openly identified its strategic prize. The US International Development Finance Corporation says Songwe Hill will help develop rare-earth supply chains “decoupled from strategic adversaries”, pointing to China’s dominance of processing. Under the proposed arrangement, mixed rare-earth carbonate produced in Malawi would pass through Mozambique to Poland for further processing, helping build an alternative to China’s supply chain.
Songwe Hill is held through a subsidiary of Canadian company Mkango Resources, whose plans link the Malawi project to a separation plant in Poland. Mkango’s development strategy targets minerals used in electric vehicles, wind turbines and other advanced technologies. Malawi risks supplying the materials for the next generation of transport while its own motorists remain dependent on imported second-hand vehicles with nothing from the country’s own mines building industry at home.
The contradiction extends to uranium. Malawi’s Kayelekera mine has overseas supply agreements with utilities and traders, yet the country still struggles with unreliable electricity. Its uranium is being marketed into international nuclear-fuel supply chains while Malawians wait for dependable power at home. At Kayelekera, Lotus Resources holds 85 percent of the uranium operation and the Malawi government 15 percent. Production restarted in August 2025, according to the company, which has overseas sales agreements; the public interest lies in what Malawi receives through taxes, royalties, dividends and foreign-exchange proceeds.
In contrast, countries such as Burkina Faso have taken matters in their own hand. On September 28, Burkina Faso inaugurated its first national gold refinery, explicitly presenting domestic processing as a means of retaining more mineral wealth. Its government says the aim is to break with the traditional extractive model and strengthen control over its resources.
Europe, too, is protecting its industrial interests. Its Critical Raw Materials Act sets a benchmark for EU processing capacity to meet at least 40 percent of annual strategic raw-material consumption by 2030. That should challenge Malawi and the African Union (AU) to turn promises of mineral-led development into enforceable terms on processing, public revenue and local industrial investment.
Yet Malawi is still struggling with basic licensing scrutiny. In August, Parliament’s natural resources committee reported that Lindian Resources had failed to provide documents needed to assess Kangankunde’s licence classification, recommending enforcement that could include suspension or revocation. This followed questions over whether regulators had relied too heavily on investor-supplied information when classifying the project.
For a deposit promoted as globally significant, such gaps raise serious questions about the state’s ability to assess its value and protect the public interest. Now, Malawi Malawi cannot afford to negotiate world-class mineral projects from a position of weak oversight, then leave its citizens waiting for benefits while foreign investors pursue the industrial prize.
With falling tobacco receipts deepening the squeeze and Malawi’s own failure to turn its mineral wealth into sufficient public revenue and foreign-exchange earnings, the country remains reliant on external financing, be it via aid or loans. This partly explains why government is now seeking another IMF loan and lauding the ECF as an achievement. This is despite another kwacha devaluation being the possible outcome of such an agreement.
