Money in Malawi: the Malawi Kwacha

Monetary economics, international Forex and finance have always fascinated me. Modes of production and exchange are fundamentally linked to the human condition. Money is a social construct and thus a reflection of our collective values as a civilization. On its most basic and innocent level, money is a symbol. At its most complex and egregious, it is power and violence.

I’ve wanted to talk about the Malawi Kwacha for some time now. As Americans, we have the very profound privilege of having the major reserve currency of the world — that is, we have the money that many (if not all) countries want to have in their banks. Because of this privilege, we can purchase imports and borrow across borders more cheaply than people in other nations because we don’t need to exchange our currency to do so. It is a big advantage and one that few Americans ever reflect on. Our lives are made so much easier for this.

A stable currency is such a blessing to us in America but in Malawi, the currency fluctuates because it is “pegged” to the dollar (note: not officially) which causes many issues. Inflation is a serious issue here. Since I’ve began my Peace Corps service in 2014, the inflation has been something like 40% (loosely figured). This makes prices unstable and markets inefficient.

Currently, the exchange rate for an American dollar is 628 Malawi Kwacha. That is to say, if I give a Malawian $1, I expect to receive MK628.

A 300-milliliter Coke (about 10 ounces) costs MK200, about $0.32. To pay for this Coke, you would give the vendor two MK100 bills or one MK200 banknote.

Here are pictures of the Malawi Kwacha banknotes and coins:

Prices of some common goods in Malawi:

Item Dollars Item Dollars
(1) Tomato   $              0.08 Coke  $              0.32
(1) Onion   $              0.08 150 km transport  $              5.57
(3) Okra   $              0.08 Meal at fast-food restaurant  $              3.18
(1) Green Pepper   $              0.08 Bath soup  $              0.96
(3) Carrot   $              0.03 Toilet Paper  $              0.40
(L) Orange Sweet Potato   $              0.03 Candles (6)  $              0.76
(M) Pumpkin   $              0.32 Toaster  $            14.33
(3) Chinese Cabbage   $              0.08 Cement (50kgs)  $            10.35
(1) Cabbage  $              0.40 Wheelbarrow  $            65.29
(1) Garlic clove  $              0.08 Cheap car  $       2,388.54
(1) Avocado  $              0.32 Hotel night  $            22.29
Beans (3 cups)  $              0.48 Beer  $              0.72
(1) Egg  $              0.13 Cigarettes (pack)  $              0.80
(10) Bananas  $              0.16 Bread loaf  $              0.43
(1) Orange  $              0.08 Match box  $              0.06
(1) Eggplant  $              0.16 Peanut butter (Med)  $              3.18
(1) Baobob fruit  $              0.32 (1) Gallon petro  $              4.82
(1) Mango  $              0.08 (1) chicken  $              3.18
Baking Flour  $              0.80 (1) mud brick  $              0.02
Soya Pieces  $              0.16 Snickers  $              1.11
Potatoes (pile)  $              0.32 Used T-Shirt  $              0.80

Wages in Malawi are tricky. The statutory minimum wage in Malawi is MK687 for a day’s work (or $1.09) but because enforcement of tax and labor laws in Malawi are not stringent, many (if not most) wage-earners do not make this amount per day nor is it accounted for in bookkeeping and thus announced to the proper regulatory officials — it’s all done “under the table”. Bigger companies and organizations are more strictly monitored.

Costs of living (per the prices above) are relatively inexpensive in the village. 85% of Malawians are subsistence farmers so food costs are manageable — any staple food surplus is sold for sources of protein, cooking oil, salt and other processed foods. Raw food prices are low because people grow their own food. Manufactured goods are comparable to prices in America — most of which are cheap plastic imports from China and other Southeast Asian countries. 

Inflation in Malawi is due to many complex reasons but the biggest are a weak economy due to infrastructure and labor issues (unemployment, workers’ rights, etc.), reliance on foreign aid (some 40% of the national budget), import/export trade imbalances and the strengthening of major reserve currencies relative to the Kwacha. 


4 responses to “Money in Malawi: the Malawi Kwacha

  1. Missing is the cost of wages or some relevance to their living scale, and then why is there a 40% inflation rate? What US & FED policies are creating this hardship? Here one garlic head is $1., one apple can cost
    $5. depending on the type and weight, butter $5. (all while gas is $2.) so without knowing their wages their goods seem less expensive than ours. If you haven’t seen my latest post Congratulations on your engagement hope you make it through Woodstock!

  2. Great to see Malawi PCVs thinking about macroeconomics. As a PCV, it’s very easy to focus on the trees (your village) and miss the forests (eg, politics, econ, climate change). One thing I would note is that, while agricultural prices in the village are relatively low, farm inputs (eg, seeds, fertilizer) are imported and thus bear prices that are subject to the worsening exchange rate. There’s also the issue of protectionism — policy makers have protected many immature economies with fixed exchange rates (eg, South Korea). Why not Malawi? Might be time for Malawi to resist the donors and return to a fixed-rate regime.

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