In November 2023, two events reshaped Malawi’s economic landscape in the space of a week: a 44% devaluation of the Malawian Kwacha, setting the official rate at approximately MK 1,700/USD, followed by the IMF approving a $178 million Extended Credit Facility (ECF) arrangement.

The devaluation

The 44% devaluation was the second major currency adjustment in 18 months — a 25% devaluation had already taken place in May 2022. Together, they represent a fundamental repricing of the Kwacha against international currencies.

The devaluation was a condition of the IMF program. From the IMF’s perspective, an overvalued official exchange rate was suppressing exports, distorting import prices, and encouraging the informal forex market that had developed alongside the official rate.

From the perspective of businesses and households in Malawi, the devaluation immediately increased the MWK cost of all imported goods — fuel, food, medicines, equipment — and increased the local currency burden of USD-denominated debts and contracts.

The IMF program

The $178 million ECF arrangement was approved on November 15, 2023, one week after the devaluation. The 48-month program supported the government’s macroeconomic adjustment and reform agenda, with disbursements conditional on completing programme reviews covering fiscal consolidation, monetary policy, exchange rate management, and structural reforms.

The combination of devaluation and program approval was intended to restore macroeconomic stability, rebuild forex reserves, and create the conditions for sustainable growth. The program was also intended to unlock budget support from other donors who had been waiting for the IMF anchor.

What it meant in practice

For companies operating in Malawi in late 2023, the immediate effects were significant:

  • Import costs rose sharply. Everything priced in USD — fuel, equipment, raw materials — cost 44% more overnight in MWK terms.
  • Local staff costs in USD terms fell. Companies paying local staff in MWK saw their USD-equivalent labour costs drop, improving the economics of hiring locally.
  • Forex availability improved modestly. The official rate became more realistic relative to the informal market, encouraging some return of USD to official channels.
  • Inflation accelerated. The pass-through of import price increases into consumer prices contributed to inflation rising to 28.7% in 2023 and 32.3% in 2024.

The longer tail

The devaluation established a new baseline that has held broadly stable in official terms since late 2023 — the rate has remained around MK 1,700–1,750/USD at the official level. The informal market diverged significantly, reaching premiums of up to 150% by March 2025, reflecting continued forex scarcity despite the official stabilisation.

The IMF program itself terminated in May 2025 after no review was completed over an 18-month period — an outcome that reflected the difficulty of maintaining reform momentum in a challenging political and economic environment.

Our read

The November 2023 devaluation is the reference point for understanding Malawi’s current operating environment. Companies that built financial models on pre-devaluation rates and did not adjust them are the ones that have found the environment most difficult. Proper financial structuring from the outset — with realistic forex assumptions — is the difference between a manageable operating environment and a costly surprise.

Sources: Bloomberg, IMF press release November 2023, FEWS NET November 2023, ActionAid Malawi.