By Kingsley Jassi:
Statistics show that the country is experiencing a constant annual drop in receipts of personal remittances as the World Bank records that $179.7 million (K314.6 billion) was received in 2023.
The 32 percent drop from $264.3 million (K462.7 billion) in 2022 is a second drop after a 17 percent decline of receipts from $318.6 million (K557.8 billion) in 2021.
This is working against a strategy by the Reserve Bank of Malawi, which has been working on encouraging more Malawians in the diaspora to send remittances without restrictions that worked as demotivation.
The central bank’s strategy recognised remittances from the diaspora as a significant source of forex and the strategy started to yield, leading to a 717 percent increase over a six-year period from 2016 to the record $318.6 million receipts in 2021.
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Financial Market Dealers Association President Leslie Fatch attributed the drop to the unattractive exchange rate, which has drastically slowed down the flow of forex from outside the country.
“We can speculate that the exchange rate is the major issue. Previously, there were tight restrictions but the Reserve Bank and commercial banks have done a lot in relaxing the conditions,” Fatch said.
According to Fatch, people in the diaspora were previously restricted to $1000 a year, which limited the flow but that this was relaxed through the reviewed exchange control guidelines.
The central bank further removed restrictions on the transfer of forex from the diaspora, which now can be transferred to different foreign currency denominated bank accounts.
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“We can see that with the removal of these restrictions, the regulations have been relaxed enough and we should have seen an increase in remittances. But the exchange rate remains a big issue now which has impacted formal forex channels,” Fatch said.
According to Fatch, the situation is making forex flow to the black market.
Meanwhile, there has been a similar trend in the outflow of remittances, dropping from $192.9 million in 2022 to $130.2 million in 2023.
This trend follows a sharp increase between 2020 and 2021 when outbound remittances increased from $36.9 million to $166 million before increasing further to $192.9 million in 2022.
Malawi’s forex shortage has seen people using informal channels to move forex, eluding the formal channels that attract much low rates.
Malawi’s Ambassador to the United States Esmie Chombo disclosed in April when President Lazarus Chakwera met people living in the US that a study her office conducted discovered that remittances were moving through informal channels.
