Currency Board Arrangement system is the only credible monetary policy solution for Malawi to implement to rescue the economic crisis—economist Thomas Ngoma

* The options are limited if Malawi remains within the framework of the current international monetary system

* He criticises past choices like the soft fix peg during President Arthur Peter Mutharika’s administration and the current floating type, which he argues promotes economic instability

* Ngoma advocates for a hard peg, which he says European nations have used effectively since the inception of central banking

By Duncan Mlanjira

Thomas Ngoma, a UK-based Malawian executive management consultant, asserts that Malawi’s current economic situation can only be rescued through the Currency Board Arrangement (CBA) system.

Ngoma made this observation following the stance of the Institute of Chartered Accountants of Malawi (ICAM), which notes that despite exceeding quantitative inflation thresholds, Malawi does not meet the criteria of a hyperinflationary economy under International Accounting Standard (IAS) 29.

In June last year, ICAM also assured the public that Malawi’s economy was not hyperinflationary at that time following reports from PwC, the International Monetary Fund’s (IMF) World Economic Outlook, and the International Practices Task Force (IPTF), that suggested that Malawi could be classified as hyperinflationary by December 31, 2024.

According to international accounting firm, Deloitte, IAS 29 applies where a country’s functional currency is that of a hyperinflationary economy. Hyperinflation refers to rapid and unrestrained price increases and inflation in an economy over time, typically at rates exceeding 50% each month.

Hyperinflation can occur in circumstances affecting the underlying production economy in conjunction with a central bank printing excessive money.

Thus Ngoma joined a debate with high-profile economists on a WhatsApp group, discussing alternative monetary policy systems for Malawi. According to Ngoma, the options are limited if Malawi remains within the framework of the current international monetary system.

He criticises past choices like the soft fix peg during President Arthur Peter Mutharika’s administration and the current floating type, which he argues promotes economic instability.

Ngoma advocates for a hard peg, which he says European nations have used effectively since the inception of central banking. He explains that the hard peg currency exchange classification has two categories — ‘No separate legal tender’ and ‘Dollarisation’.

Though dollarisation is a superior solution compared to soft peg or floating options, Ngoma prefers the CBA as “it allows Malawi to retain its kwacha currency while ensuring it operates as a hard currency backed by a foreign currency like the US dollar at a fixed exchange rate”.

“The CBA offers numerous benefits, including low inflation, low interest rates, unlimited forex availability, and a solid platform for rapid industrialisation,” says Ngoma — emphasising that this monetary policy choice “should not be confused with the need for export production, which remains necessary regardless of the chosen policy”.

Ngoma also commented on the CBA in 2023 in response to President Lazarus Chakwera’s administration opting to use the International Monetary Fund’s (IMF) extended credit facility (ECF) as an emergency source of foreign reserves.

He warned about the restrictions imposed by IMF conditionality from ECF borrowing, which he presented as a case study at an international workshop.

Ngoma explains that “a currency board backs its currency either 50% or 100% by an anchor foreign currency like the US dollar, British pound, or euro at a fixed exchange rate”.

“This system manages the exchange rate and money supply separately or within the central bank. Additional benefits of the CBA include low core inflation, increased investor confidence, and the elimination of forex shortages.”

In summary, Ngoma highlights that the CBA “will bring economic stability to Malawi through rule-based governance, low inflation, and increased investment, which has the potential to spur rapid economic growth and industrialisation”.

Ngoma’s extensive experience covers various sectors and regions, providing him with deep insights into the best practices for addressing and solving business problems. He holds degrees in Mechanical Engineering and Manufacturing Systems Engineering, further supporting his credibility in advising on strategic business transformation.

In its reports, ICAM president, Daniel Jere indicated that in determining whether a country meets the IAS 29 threshold, requires evaluating qualitative and quantitative factors, including cumulative inflation and behaviours in the economy.

“As at March 31, 2025, cumulative inflation in Malawi over a three-year cycle reached 118% (112% per previous assessment as at 30th November 2024), surpassing the 100% IAS 29 threshold.

“However, despite the high inflation, the other qualitative indicators of hyperinflation were not evident as at that date. Most prices remain quoted in Malawi Kwacha, and the population continued to value it as legal tender for transactions in the country.

“There was no evidence of widespread immediate investment of local currency to preserve purchasing power or of prices and wages being indexed to inflation.”

ICAM took note of Malawi’s “prolonged shortage of foreign currency [which] led to a reliance on the parallel market, which contributed to inflationary pressures”.

“Food inflation remained relatively higher than anticipated due to maize shortages in some parts of the country. This notwithstanding, sales and credit transactions were still largely based on historical costs, interest rates remained stable (with policy rate remaining at 26% and wage adjustments were not aligned with CPI changes.”

Thus, ICAM contends that “despite exceeding quantitative inflation thresholds, the overall assessment remains that the country does not meet the full criteria of a hyperinflationary economy under IAS 29”.

“Therefore, hyperinflationary financial reporting directive issued on 27th December, 2024 remains in force,” says Gondwe in the statement, adding that ICAM will continue to monitor the situation and will issue a comprehensive guidance as at June 30, 2025.