Malawi Freedom Network 
By MFN News Desk Team
Published: October 8, 2026
The debate over the role of the International Monetary Fund (IMF) in Africa has intensified as countries across the continent continue to grapple with high inflation, foreign-exchange shortages, debt pressures and rising living costs.
At the centre of the debate is currency devaluation or depreciation—a policy that can help correct exchange-rate imbalances and improve access to foreign currency, but which can also make imported goods more expensive and place additional pressure on households.
For ordinary Africans, the question is increasingly direct: When a country’s currency loses value, who ultimately pays the price?
What currency devaluation means
Currency devaluation refers to a deliberate reduction in the official value of a country’s currency against foreign currencies, particularly the US dollar. Depreciation can also occur through market forces when demand for foreign currency exceeds its supply.
For countries such as Malawi, where the economy depends heavily on imports, movements in the exchange rate can quickly affect the cost of fuel, fertiliser, medicines, machinery, food and other essential goods.
This is why exchange-rate policy is not simply an issue for economists and central banks. It can directly affect household budgets and the cost of living.
Why critics say devaluation can increase hardship
The strongest criticism is that currency depreciation can feed directly into inflation.
When the local currency loses value, importers need more local currency to purchase the same amount of goods priced in US dollars. Businesses may then pass those higher costs on to consumers.
The result can be higher prices for fuel, transport, food, medicines and other imported products.
The IMF itself acknowledges that depreciation can create significant difficulties in vulnerable economies. In its analysis of Malawi, the Fund says currency devaluation can contribute to higher inflation, currency speculation and potentially lower economic growth, particularly in an import-dependent and poorly diversified economy.
Recent IMF analysis of Malawi also found a measurable relationship between exchange-rate depreciation and inflation. Its research estimated that a one-percentage-point depreciation shock was associated with approximately a 0.1 percentage-point immediate increase in monthly inflation.
That finding gives greater weight to concerns that exchange-rate adjustments can have immediate consequences for consumers.
Malawi provides an important example
Malawi’s economic experience illustrates the complexity of the issue.
The IMF reported that Malawi’s November 2023 devaluation was intended to address exchange-rate pressures. However, subsequent inflation and foreign-exchange shortages created further difficulties.
According to the IMF’s 2025 assessment, inflation reached 30.7 percent year-on-year in February 2024, while the country continued to experience severe foreign-exchange shortages. The Fund also reported that the gap between official and parallel-market exchange rates became extremely large.
The IMF argues that Malawi’s problem cannot be solved simply by maintaining an artificially strong official exchange rate. It says a unified, market-clearing exchange rate is important for restoring macroeconomic stability and reducing distortions.
But importantly, the IMF also recognises the potential social cost.
Its Malawi report says an exchange-rate adjustment under conditions of macroeconomic instability could perpetuate a depreciation-inflation cycle and recommends that reforms be accompanied by social safety nets to cushion households from short-term impacts.
Does IMF policy automatically mean more poverty?
This is where the debate requires careful examination.
It would be too simplistic to conclude that every currency adjustment imposed under an IMF programme automatically causes poverty.
The IMF’s argument is that countries facing persistent foreign-exchange shortages, fiscal deficits, debt problems and distorted exchange rates may eventually have to correct those imbalances.
A more realistic exchange rate, the Fund argues, can encourage foreign currency to move through official channels, improve export competitiveness and reduce distortions created by large differences between official and parallel exchange rates.
However, the transition can be painful—especially where people already spend a large share of their income on food, transport and energy.
That distinction is important.
The question is therefore not simply whether devaluation is good or bad. The bigger question is how it is implemented, what safeguards accompany it, and who bears the adjustment cost.
Why poor households are particularly vulnerable
Poor households have fewer options when prices rise.
A wealthy household may respond to higher food prices by reducing spending elsewhere or switching to cheaper alternatives.
A low-income family that already spends most of its income on food may have nowhere else to cut.
The IMF said in October 2026 that recent global cost-of-living crises have disproportionately affected poorer households because they spend a larger share of their budgets on basic necessities. The Fund estimated that the increase in food and energy prices between 2021 and 2024 meant around 23 million more people fell into extreme poverty than previously estimated.
This reinforces one of the central concerns surrounding economic adjustment programmes: macroeconomic stability can be necessary, but stability on paper does not automatically mean improved living standards for ordinary citizens.
Why the IMF defends exchange-rate reforms
The IMF maintains that it does not simply advocate uncontrolled currency devaluation.
In its explanation of Malawi’s exchange-rate reforms, the Fund says its objective is a unified, market-clearing exchange rate supported by broader reforms.
The argument is that an artificially maintained official exchange rate can create shortages, encourage parallel markets and make foreign exchange difficult to obtain through official channels.
The IMF also argues that countries need fiscal discipline, stronger debt management, better revenue collection and improved monetary policy alongside exchange-rate reforms.
In other words, currency adjustment is presented as one component of a wider economic restructuring programme—not a solution on its own.
But the African debate remains unresolved
Across Africa, IMF-supported reforms have frequently generated public debate over austerity, taxation, fuel subsidies, exchange rates and government spending.
Critics argue that economic reforms can place disproportionate pressure on ordinary citizens while governments attempt to meet fiscal and debt targets.
Supporters, on the other hand, argue that countries sometimes turn to the IMF precisely because they are already facing severe economic problems and lack sufficient foreign exchange or financing options.
The disagreement therefore centres on an important issue:
Should economic adjustment prioritise immediate macroeconomic stability, or should governments place greater emphasis on protecting household incomes during the adjustment process?
The answer may require both.
What should African governments demand?
African governments negotiating with international financial institutions have a responsibility to ensure that economic reforms are adapted to their domestic circumstances.
That includes demanding clear assessments of the social consequences of major policy changes.
Before implementing a major currency adjustment, policymakers should consider:
- How will food prices be affected?
- What will happen to fuel prices?
- How will fertiliser costs change?
- What happens to medicine prices?
- How will businesses access foreign exchange?
- What protection will low-income households receive?
- Will wages keep pace with inflation?
- How will small businesses survive higher import costs?
- What measures will increase domestic production and exports?
- How quickly can foreign-exchange shortages be resolved?
These questions are particularly important for economies that import large quantities of essential goods.
The bigger issue: Africa’s dependence on imports
One reason currency depreciation can be so painful is that many African economies remain heavily dependent on imported goods.
If a country imports fuel, fertiliser, machinery, medicines and food, a weaker currency can quickly transmit international prices into domestic markets.
That means the long-term solution cannot simply be repeated currency adjustments.
African economies also need stronger domestic production, agricultural productivity, manufacturing, exports, energy security and regional trade.
The IMF itself has noted that countries with heavy dependence on food and energy imports can experience stronger exchange-rate pass-through into domestic inflation.
The question Africa cannot ignore
There is a legitimate economic argument for correcting distorted exchange rates. There is also legitimate concern about the social consequences of doing so without adequate protection for vulnerable households.
Both realities can exist at the same time.
For Malawi and other African countries, the critical issue should therefore be how to restore economic stability without transferring an excessive share of the adjustment burden onto ordinary citizens.
Economic reforms should ultimately be judged not only by foreign-exchange reserves, debt ratios or fiscal balances, but also by whether families can afford food, businesses can operate, farmers can access inputs and workers can maintain their purchasing power.
The debate belongs to everyone
The IMF says exchange-rate reforms are intended to correct economic distortions and restore stability. Critics remain concerned that adjustment programmes can increase the cost of living and place disproportionate pressure on poorer households.
Africa needs this debate to be based on evidence, transparency and accountability.
Citizens should ask their governments—and international lenders—three fundamental questions:
What problem is this policy solving?
Who benefits from the reform?
And who is paying the price?
The answers could determine whether economic reform becomes a pathway towards sustainable growth or another period of hardship for millions of ordinary Africans.
What is your view? Does currency devaluation ultimately help African economies recover, or does it place too much of the burden on ordinary people? Share your thoughts and join the debate.
