Exchange rate spread worries World Bank – The Times Group

Malawi’s currency misalignment has worsened since the November 2023 devaluation, with the gap between the official and parallel-market exchange rates reportedly peaking at over 150 percent in early 2025, the World Bank says.

The latest Malawi Economic Monitor (MEM) report of the World Bank reveals that although the Reserve Bank of Malawi (RBM) has maintained a largely stable official exchange rate—with the spread between the bureau and official rates hovering around 10 to12 percent—the gap between the official and parallel market rates has continued to widen.

The Bretton Woods institution attributes the growing misalignment to persistently low official foreign exchange reserves; a situation exacerbated by limited exchange-rate flexibility and continued sales of foreign currency to authorized dealer banks.

“Foreign exchange market distortions, combined with structural issues and a widening trade deficit, have drained reserves,” the report notes.

Since 2019, the RBM has been a net seller of foreign exchange, selling $2.9 billion to authorised dealers while only purchasing $2.4 billion over the same period, according to World Bank data.

The report further points to the government’s policy response, noting a heavy reliance on administrative measures that fail to address core structural challenges.

Speaking at the RBM Malawi Investor Symposium on Tuesday, RBM Governor McDonald Mafuta Mwale said the central bank is now expanding focus toward supporting production and productivity.

In an interview, Financial Market Dealers Association President Leslie Fatch, attributed the ongoing currency challenges to unresolved structural problems.

“Once we have enough supply there is no motivation for players to go to the parallel market which at this point remains a hot issue because the structural issues have not been addressed,” he said.

_{Images are for reference only.Images and contents gathered automatic from google or 3rd party sources.All rights on the images and contents are with their legal original owners.}