Malawi: a small economy in one of the most severe dollar squeezes on the continent

Most of the markets in this series are large — big economies with big flows where the opportunity is obvious. Malawi is the opposite, and I include it deliberately. It is small, low-income, and landlocked, and it is living through one of the most acute foreign-exchange crises anywhere in Africa. It matters here not because of its size, but because it shows the core problem of this series in its rawest, most undiluted form.

When the pain is this severe, the logic of an alternative becomes impossible to ignore.

The squeeze

Malawi imports much of what it needs to function — fuel, fertiliser, medicine, machinery — and it earns relatively little foreign currency to pay for them. That imbalance has produced a chronic, grinding shortage of dollars. Foreign reserves have at times fallen to the equivalent of only a few weeks of imports, well below any comfortable threshold.

The currency has borne the strain. The kwacha was devalued sharply — by around forty-four per cent in a single move in late 2023 — and has continued to slide since. For an importer, the combination is brutal: not only are dollars scarce, but the local currency you hold buys fewer of them each month. Businesses queue for foreign exchange they may never receive, and a parallel market fills the gap at a steep premium. The shortages of fuel and essential goods that follow are not abstract economics; they are felt in daily life.

Layered on top is debt. Like several of its neighbours, Malawi spends an outsized share of government revenue simply servicing debt, leaving little room to manoeuvre and adding to the pressure on its scarce hard currency.

Where stablecoins fit

In a market like this, the appeal of a dollar that lives on a phone is self-explanatory. A stable store of value that does not evaporate with each devaluation, and a way to move value across a border without competing in a forex queue that may have nothing to give — these are not conveniences in Malawi. They answer the central problem of the economy.

I will be honest about the stage, though. Malawi is a frontier market for this technology. Adoption is grassroots and early, the volumes are small compared with Nigeria, Kenya, or Ghana, and the formal infrastructure is thin. This is not a market that delivers scale tomorrow.

My read

Malawi is what I would call a clarity market rather than a volume market. It will not, on its own, move the needle for a settlement business in the near term. But it strips the thesis down to its essentials: a country that genuinely cannot get enough dollars through the formal system, a currency people cannot rely on to hold value, and a population for whom an alternative is not a luxury.

The opportunity in Malawi is not immediate scale; it is direction. As regional settlement rails extend across East and Southern Africa — and as continental initiatives knit smaller markets into larger networks — economies like Malawi are exactly the places where regulated digital settlement can do the most good and meet the least resistance. I watch Malawi not for the size of the flow today, but because it shows, with no noise around it, precisely why this whole field exists.