Lilongwe, Milawi – In Milawi’s capital city of Lilongwe, Charles Kabenan desciribed his recent experience when visiting a shop to purchase building materials. The previous day, the total cost of the items had been K1,195,400 (US$681.38), yet within mere hours, it had surged to K1,390,000 (US$792.30).

Shocked by the situation, he observed that some items were running out of stock and that suppliers were ‘feeling the pinch of the unstable economy,’ as he now faced a 17% increase on his original quotation since the price surge had begun.

The experience is a reflection of the Malawian economic picture. The southeastern African nation - the fourth poorest country in the world, where over half of the population lives in poverty and one-fifth in extreme poverty, according to data from the World Bank- is going through an economic downturn that has seen the price of goods and services skyrocket in a matter of months.

The country, like others in the region, is reeling from the aftermath of El Niño and La Niña weather conditions, which has led to drought and severe hunger.

There is also a lack of foreign exchange, making it almost impossible for companies to operate or export raw materials. The result has been a thriving business on the black market, as well as some companies closing down or raising the price of their commodities. A bag of maize, the staple food, costs over MK100,000 (€50), while the country’s minimum wage is €45.

While presenting the 2025/26 National Budget in parliament, the minister of finance and economic affairs, Simplex Chithyola Banda, announced strategies to revamp the economy, including stabilising foreign exchange by clamping down on the black market, banning the importation of non-essential commodities that can be produced locally, and giving companies and individuals incentives to ramp up local production.

Recently, this was compounced by a wave of protests by street vendors, who accuse the government of failing to control the rise in the cost of goods and subsequently putting them out of business and disrupting livelihoods, has broken out in both the capital, and Blantyre, the commercial city.

Meanwhile, Banda has said the economy will grow by 3.2 per cent this year. He also announced plans to prop up the economy through measures such as cracking down on the black market, prohibiting the importation of non-essential goods that can be produced domestically, and providing businesses and individuals with incentives to increase local output. The government has since applied a 20 per cent salary increase for all civil servants.

The President of the Economics Association of Malawi (ECAMA), Bertha Bangara-Chikadza, observed that the country is struggling because of a shortage of foreign exchange in the banks and the speculative behaviour that follows, as well as a poor harvest of maize, which contributes significantly to the food basket. She told RFI, "We are glad that inflation has started going down.”

She explained that the disparity between the black market exchange rate and the official financial sector rate typically occurs due to high demand for foreign currency that banks are unable to fully meet. As a result, people turn to the black market to obtain this scarce resource.

Additionally, she added, some individuals are taking advantage of the situation by inflating prices beyond necessary levels, and speculative behavior became evident in the economy.

Furthermore, a drought negatively affected agricultural production, leading to a decline in food and agricultural exports. This, she said, worsened the situation, as rising food prices—especially maize, the staple food for Malawians—added significant economic pressure.