BLANTYRE-(MaraviPost)-United Transformation Movement (UTM ) President and former Reserve Bank of Malawi (RBM ) Governor Dalitso Kabambe says the government’s recent fuel price increase reflects deeper structural weaknesses in Malawi’s economy, arguing that price adjustments alone cannot resolve the country’s persistent fuel shortages and foreign exchange challenges.

In an interview with Maravi Post,Kabambe said the government’s decision to raise fuel pump prices by 41 percent under the Automatic Pricing Mechanism (APM) may be technically compliant with the established pricing framework, but falls short of addressing the underlying causes of Malawi’s fuel crisis.

“From a narrow regulatory standpoint, the decision is defensible because the formula has been applied as designed.

“However, treating this adjustment as a sufficient response to Malawi’s fuel challenges would be a strategic mistake,” said Kabambe.

He noted that while cost-reflective pricing can help prevent losses in the fuel supply chain and reduce hidden subsidies, Malawi’s recent experience shows that strict adherence to the APM has not guaranteed fuel availability, foreign exchange stability, or economic resilience.

The ex-RBM Governor highlighted that when the Malawi Congress Party (MCP) assumed office in 2020, fuel prices stood at K699 per litre.

He said over the past five years, successive APM-driven adjustments pushed prices as high as K2,530 per litre, before an administrative price freeze was imposed.

Kabambe said the last price adjustment under the MCP administration, in October 2025, saw fuel prices rise to K3,459 per litre.

He said despite these historically high prices, fuel shortages persisted, parallel markets emerged, and pressure on foreign exchange intensified.

“If higher prices alone were sufficient to stabilise fuel supply, these outcomes should not have materialised,” said Kabambe, adding that the continued challenges indicate that Malawi’s fuel problem is structural rather than a pricing anomaly.

Kabambe warned that fuel price increases have far-reaching inflationary effects due to the central role of fuel in the economy.

He noted that transport costs account for approximately 56 percent of landed transport costs and about 30 percent of export costs, significantly undermining Malawi’s international competitiveness.

The UTM leader explained that fuel is a highly inelastic commodity and a foundational input in transport, agriculture, manufacturing, electricity generation, and public service delivery.

He said as a result, higher fuel prices transmit inflation throughout the economy, driving up food prices, production costs, and household expenditures.

“A sharp fuel price increase imposes immediate and broad-based economic pain on both households and firms,” he said.

Kabambe further observed that Malawi’s production and trade structure amplifies this vulnerability, as a large share of goods transported within the economy includes petroleum products themselves and bulky agricultural commodities such as fertiliser, maize, and tobacco.

While acknowledging that higher fuel prices may temporarily improve cash flow in the fuel importation and distribution chain, Kabambe cautioned that such gains are fragile without parallel reforms.

“The system remains exposed to foreign exchange shortages, inefficient procurement arrangements, logistical bottlenecks, and global oil price volatility.

“Under such conditions, today’s adjustment simply postpones tomorrow’s crisis,” he said.

Kabambe criticised what he described as poor policy sequencing, arguing that the government has opted to shock an already fragile economy before addressing its structural weaknesses.

“Foreign exchange supply remains weak, export capacity is constrained, transport and logistics costs remain high, and public sector inefficiencies persist.

“Pain imposed without prior strengthening does not build resilience it breaks it,” he said.

The economic genius further warned that the cumulative impact of higher PAYE, VAT, capital gains tax, and fuel prices is systematically draining capital from the economy, leaving households without savings and businesses without reinvestment capacity.

He also described the policy direction as contradictory, noting that while government speaks of private sector growth and job creation, it simultaneously raises operating costs and suppresses consumer demand.

“A durable solution must go beyond the pump price,” he said.

Kabambe called for structural reforms aimed at strengthening export capacity, reducing transport and logistics costs, and improving fuel supply efficiency.

He proposed strategic investment in rail transport, including modern electric trains, inland logistics infrastructure, and the development of a fuel pipeline to reduce reliance on road haulage.

He also emphasised the need to strengthen governance, efficiency, and transparency in fuel procurement, storage, and distribution to eliminate avoidable costs and leakages.

Kabambe stressed that the APM remains an important tool for transparency, predictability, and protection against ad hoc political interference, but said it must be embedded within a broader fuel security and economic competitiveness strategy.

“On its own, it cannot resolve Malawi’s fuel vulnerabilities,” he said.

He concluded that the key policy question is not whether the APM has been followed, but whether fuel pricing decisions are advancing Malawi toward sustained fuel availability, lower structural costs, and long-term economic stability.

The Maravi Post