* Use the hard peg, not soft peg, to fix the kwacha exchange rate; cut down the government budget fiscal deficit; promote industrialisation to rebalance the economy
* Promote export of high value items of processed products not relying on commodity trade, i.e. raw agroproducts, raw mineral exports
By Duncan Mlanjira
The report by the International Monetary Fund (IMF), after a delegation made an evaluation visit to Malawi from May 22 to June 3, continues to rouse hot debate amongst economists and business experts, observing that serious issues raised include the need for country’s administration to consider devaluing the Kwacha.
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In its report released in Washington, DC on June 4; https://www.imf.org/en/News/Articles/2025/06/04/pr-25175-malawi-imf-completes-2025-art-iv-mission, the IMF delegation led by Justin Tyson held meetings with the Malawian authorities and other counterparts from the public and private sectors discussions “focused on policies to restore macroeconomic stability, and the structural reforms needed to foster strong, inclusive, and durable growth”.
In his analysis, Thomas Ngoma — a UK-based Malawian executive management consultant — contends that Malawi must face reality as it is dangerous to maintain a false exchange rate i.e. an overvalued currency exchange”.
“That is the whole essence of the IMF policing the international monetary system to ensure nations do not deliberately overvalue their currencies so they can import more.
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“By refusing to devalue the kwacha to reflect its true value, that is cheating the international monetary system — it is not allowed. This position can be seen clearly if monetary policy in Malawi was linked to its balance of payments.
“By refusing to address the devaluation call when the real value of the kwacha demands to be devalued, that is gaining the system and is not allowed,” says Ngoma, adding that the solution to Malawi’s situation “is to reform the monetary system so that it does promote these imbalances”.
He thus suggests that the state authorities should:
* use the hard peg, not soft peg, to fix the kwacha exchange rate;
* cut down the government budget fiscal deficit;
* promote industrialisation to rebalance the economy;
* promote export of high value items of processed products not relying on commodity trade, i.e. raw agroproducts, raw mineral exports, etc.
“Malawi needs new strategies to manage the economy. Operating with widening multiple exchange rates (MERs) is a clear sign of monetary policy failure,” he said, while advising that the Reserve Bank of Malawi (RBM) “must devise strategies to ensure that the market rate does not stray away from the official rate”.
Reserve Bank of Malawi
“Malawi must develop means to be economically independent. It has the resources, human power, the brains and a simple uncomplicated pathway to progress.
“Fix the Kwacha, lower interests rates to around 2% and then focus on right mineral deals, industrialisation, financial discipline, no free lunchies, food for work from the top downwards, no-work-no pay given targets, bonuses for great work etc.
“Some things do not necessarily require economic theories. I like Adam Smith, some of his work, he was explaining why changes and progress occurred in certain spaces in the UK, he in many ways did not try to suggest a pathway to progress.
“There is no one size fits all. Malawi should chart its path to serious development, not 1.8% growth wrtten as a small drop from 2.0% — this is no growth at all.”
Ngoma was speaking on a high level group of fellow economists and technocrats, and responding to Ngoma’s assessment, one said: “The majority of our people are primarily interested in self-enrichment, and doing their job without raffling any feathers.
“That’s why we are the way we are after so many years of independent rule. We lecture to each other all the time, but there is little evidence that anyone is listening and plans to seriously do something about it.
“This country requires a new breed of institutional leadership with different cultural background and attitudes than the majority of us. It has NOT developed in any serious sense since 1964.
“Our private sector, which should be the pillar of industrial development in this, has never been expanded to be all inclusive. We still have a few at the top, and everybody else at the bottom.
“We still have a single lane highway from Nsanje to Karonga — no six lane highways anywhere. All we are doing is planting tobacco and maize and a few other crops.
“We have created many real private sector commercial farmers with power and muscles to export agricultural produce on their own in masses.”
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To which Ngoma responded, saying “Malawi does not have many production investment incentives — that is why economic growth is stagnant. There are many investment incentives that we deploy in Malawi to supercharge production if we get over this first hurdle of changing monetary policy and permanently exit the IMF extended credit facility (ECF) program, which comes without crippling conditionalities that frankly tie the government hands in terms of social safety net programs as well as subsidies and tax credits.
“There are no incentives to manufacturers; no incentives for new industrial projects; no amenable bank loan interest rates to guarantee the survival of new industrial establishments. Yes, sometimes they offer tax free status for the first few years, but what new industries need most is low bank loan interest rates.”
Ngoma further says “low bank loan interest rates is something government can easily achieve with all commercial banks, if they set their minds and power to do so”.
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Two days ago, also reacting to the IMF report 2025 Article IV Consultation on Malawi, former Malawian diplomat, James Woods Nkhutabasa asserted that “Malawi is not beyond repair but it is on borrowed time” adding that either the current administration leads “with courage and clarity now, or we will pay in currency far costlier than Kwacha”.
He maintained that what emerges from the IMF report “is an unmistakable message that Malawi is broke — it is functionally insolvent; the Kwacha is an illusion; the economy is not growing; public finance is a wreck and that politics is blocking progress”.
He advised that the state authorities should “stop blaming droughts and cyclones; should stop blaming opposition” among others, saying “this crisis is man-made and it can be reversed if the leadership is serious”.
He thus offers some suggestions that must be done, saying the country needs:
* a full audit and restructuring of public debt, starting now;
* a floating exchange rate based on reality, not denial;
* a lean, technocratic budget focused on productivity, not perks;
* a wartime-level agriculture and export strategy with value addition, not just raw output;
* radical transparency not speeches, not spin but figures that mean something.
“The IMF has held up a mirror — the reflection is not flattering for us a Nation. We can either keep adjusting the mirror, or start adjusting the reality,” he concluded.
