MWK (Malawian Kwacha)

What Is the Malawian Kwacha (MWK)

MWK is the currency code for the kwacha, the national currency of Malawi. Its sub-unit, the tambala, is one-hundredth of a kwacha. Sums are often written as “MK” or “K” followed by the number, such as MK 10,000 or K 10,000.

As of August 2020, 1 U.S. dollar is equal to roughly 750 MWK.

Understanding the Malawian Kwacha

The Malawian kwacha was first introduced in 1971, with an exchange rate of one kwacha to two Malawian pounds, the currency that it was replacing. The Malawian government modeled the Malawian kwacha on the Zambian kwacha (ZMK), introduced in Zambia in 1968. Kwacha is the Chichewa word for "dawn", which symbolizes the dawning of a new era post-independence.

In 2005, the Malawian government pegged the kwacha to the United States dollar (USD). An unofficial, black-market exchange rate emerged and came to predominate, diverting USD and other foreign currencies out of official channels. In 2010 1 U.S. dollar could buy 150 MWK. The Reserve Bank of Malawi liberalized the kwacha in 2012, officially devaluing it by a third, to draw in enough foreign currency to import more fuel. The kwacha has since lost more ground to the dollar, exchange near a rate of 725 kwacha to $1 as of 2018 and 750:1 by 2020.

The political situation is the greatest potential threat to the current IMF-approved course for the Malawian economy and the value of its currency. The currency was only liberalized in 2012 because the former head of state died and was replaced by someone with a different economic philosophy. As power shifts, so could Malawi’s commitment to IMF-mandated reforms.

The Malawian Economy

Malawi remains one of the world's most undeveloped countries. The largely agricultural Malawian economy relies heavily on support from the International Monetary Fund (IMF), the World Bank and other nations as it battles problems with the economy, education and the spread of AIDS. Because of its dependent position, Malawi often conforms to IMF demands to qualify for loans and other economic programs.

In 2018, the Malawian economy saw an increase in growth and drop to single-digit inflation, but public debt increased to 55 percent of GDP. The IMF approved an Extended Credit Facility (ECF) worth $112.3 million to be disbursed over three years on the condition that Malawi meets the IMF’s demands for economic reform. Specifically, the IMF is requiring Malawi to implement a monetary policy that curbs inflation but keeps positive real interest rates, increase and streamline spending on infrastructure and social service to fight poverty, reform financial management and procurement and to implement other structural reforms. The Malawian economy grew at an annual rate of 4.4% in 2019 with an inflation rate of 9.4%.

To some extent, Malawi has already begun implementing these principles. Much of the rebound in growth was due to an increase in agricultural production, but the reining-in of inflation was largely the result of successful fiscal and monetary policies.