Call to Action in Malawi: Next steps needed following the 44% devaluation of the Kwacha

Overnight, the Malawian Central Bank devalued the Malawian currency by 44% — severely impacting Malawian business owners.

Malawi is one of the poorest countries in the world, and this is the second time in 18 months that its Central Bank has devalued the currency relative to the USD.

A fall in the currency makes all imports more expensive. This rise in prices of imported goods is passed on to Malawian consumers who already suffer from 27% inflation and fuel shortages. The kwacha devaluation has triggered second and third-order effects on the Malawian economy, where 72% of people live on less than $2.15 (PPP adjusted) per day.

By increasing the price of essential goods like food, by as much as 39%, the devaluation will push Malawians away from spending in various service markets. As consumer balance sheets are immediately constrained, Malawians are forced to spend much less on hospitality and tourism. Even during this peak season, when we expect to see high sales, Malawi’s hotels, resorts, and recreation businesses are experiencing rocky profitability.

The Malawian Central Bank decision precedes a $178 million loan from the International Monetary Fund. The loan’s dispersal was contingent on the devaluation. While the IMF’s structural adjustment programs hope to benefit Malawi’s economy in the long term by boosting Malawi’s foreign exchange reserves, the timeline for economic growth and stability is unknown — leaving a breadth of challenges for all Malawian businesses in the near term.

With this reality, what mechanisms are in place to support businesses dependent on leisure and recreation spending?

The Malawian government needs to support these sectors through policy implementation. For example, the digital-nomad visas offered by Bali and Costa Rica encourage eco-tourism and boost foreign currency inflows. The domestic economic conditions in Malawi push its hospitality and recreation sectors to rely on international tourism more than ever before.

At Venice Beach Lodge we will continue to provide the highest quality service to our guests while investing heavily in our people, property, and local community here in Monkey Bay. We look forward to finding creative solutions to our current challenges that can benefit not just us, but Malawi’s hospitality and tourism industry as a whole.