Trade Ministry, CFTC to intensify market surveillance to detect unreasonable price adjustments due to Kwacha devaluation

* As pump prices of fuel have been raised with effect from today with petrol up by 44.90% from K1,746 a litre to K2,530

* Diesel at 42.40% from K1,920 to K2,734 while kerosene is up by 51.47% from K1,261 to K1,910

* MERA has also adjusted upwards electricity tariffs from K123.26/kWh to K173.70/kWh

* Reserve Bank of Malawi undertakes measures to strengthen the foreign exchange market

By Duncan Mlanjira

Following the announcement of the devaluation of the Kwacha against the US$ by the Reserve Bank of Malawi (RBM) on Wednesday, November 8, the Ministry of Trade & Industry says it has noted with concern that some manufacturers, traders and suppliers have taken advantage of the situation by unreasonably raising prices of their goods and services.

“Some traders have even temporarily closed their businesses in order to adjust prices for old stocks that were already in shelves and warehouses before devaluation,” says the statement from Secretary for Trade & Industry, Christina Zakeyu.

She thus warns the traders and general public that “hoarding of goods and services in order to take advantage of price increases is tantamount to unconscionable conduct against consumers”.

“In the same regard, selling goods and prices at excessive and unreasonable prices is a gross violation of the Competition and Fair Tradibg Act (CFTA) and as such, the Ministry of Trade & Industry and the Competition and Fair Trading Commission (CFTC) will not hesitate to take necessary action to deal with traders found engaging in such malpractices

“In dealing with such malpractices, the Ministry and the CFTC will intensify market surveillances on prices of goods and services across the country to establish and gather evidence of possible violation of the CFTA.”

The Ministry is also encouraging the general public to be proactive in reporting with immediate effect any such violations by contacting the Ministry’s Mayeso Msokera on 0999 150 718; CFTC’s Innocent Helema on 0880 725 075 or through toll free line 2489.

Meanwhile, pump prices of fuel have been raised with effect from today with petrol up by 44.90% from K1,746 a litre to K2,530; diesel at 42.40% from K1,920 to K2,734 while kerosene is up by 51.47% from K1,261 to K1,910.

Jet A-1 airfield prices has also gone up and for Kamuzu International Airport it is up by 32.67% from K1,401.06 to K1,858.83 and for Chileka at 32.16% from K1,351.67 to K1,786.39.

The announcement from Malawi Energy Regulatory Authority (MERA) said the adjustment was done after considering trends in the world petroleum products prices as well as the exchange rate movements and their impact on energy prices.

MERA has also adjusted upwards electricity tariffs from K123.26/kWh to K173.70/kWh, saying the Authority undertakes monthly reviews of tariffs for Electricity Supply Corporation of Malawi (ESCOM) through automatic tariff adjustment formular (ATAF) to assess the impact of economic fundamentals of the exchange rate and Consumer Price Index (CPI).

MERA further says in August 2023, it approved and granted ESCOM a 50.8% basic tariff increase for the period 2023-2027 in trances with the first tranche of 18% which became effective on September 1, 2023 moving the average tariff from K104.45/kWh to K123.26/kWh.

“At the time of this tariff increase, the exchange rate was at K1,126.77/US$ while the consumer price index (CPI) was at 141.6,” says Reckford Kampanje, MERA’s Board chairperson in the public notice, adding that following the forex adjustment by the RBM on Wednesday to K1,700/US$, the CPI has increased to 146.4 as noted in September.

“Applying these economic fundamentals to the automatic tariff adjustment formula results into a 40.92%,” says Kampanje, adding that tariffs are adjusted when the outcome is beyond plus or minus 5% trigger threshold — thus the need to increase the average consumer rate.

Measures by the Reserve Bank of Malawi

After observing that international foreign exchange brokers are distorting Malawi’s foreign exchange market, RBM has taken steps towards providing a regulatory regime for foreign exchange brokers.

Governor Wilson Banda says the international foreign exchange brokers “are currently not subjected to any regulation, monitoring or reporting requirements” adding that in the meantime, authorised dealers in Malawi are directed that when carrying out their functions, they should not deal with international foreign exchange brokers

The Governor further says if any authorised dealer is approached by a foreign exchange broker, they should refer such a broker to the RBM’s Director, Foreign Glows Monitoring Department — emphasizing that failure to comply with the directive may result in the revocation of the appointment to be an authorised dealer.

On that note, the Governor has set operational changes to forex market that includes the authorised dealer banks being permitted to freely negotiate exchange rates to trade with their clients and amongst themselves, notwithstanding any limitations previously in place.

RBM will be buying and selling foreign exchange “in a transparent manner through competitive auctions at market determined prices open to all authorised dealer banks in good standing and without restriction on the range or level of the exchange rate that participants can submit” and that allotment will be determined according to prices submitted.

“Auctions to purchase foreign exchange with authorised dealer banks  will switch from monthly to fortnightly. Sales will take place only as necessary to address disorderly market conditions.

The measures, says the Governor, “have been undertaken to strengthen foreign exchange market, allowing for broader participation and greater transparency, and to support the Bank’s policy of accumulating and maintaining a sufficient buffer of international reserves.

“The Bank is certain that these measures will increase flexibility in the exchange rate and thereby enhance economic activity,” says the Governor.