The Economics Association of Malawi (Ecama) and some experts have called for increased regulation in the foreign exchange market to tame the growth of informal forex channels.
This follows reports that Malawians in the diaspora are using informal networks to remit foreign currency to Malawi.
A source told Business Review last week that Malawians in the United States (US) often remit forex back home through individuals with US bank accounts who then deposit the kwacha at a local bank at an agreed exchange rate.
A Malawian citizen based in the United Kingdom is quoted as having said that the use of such informal channels, noting that he personally uses them due to attractive exchange rates compared to formal channels.
He said: “Some individuals use informal channels due to their undocumented status.
“I have permits to work here, but I prefer the informal market because the rates are attractive than dealing with authorised dealer banks.”
Spot checks in Lilongwe showed that the dollar is trading at between K2 870 and K3 000 in the parallel market. On the other hand, the official exchange rate stands at K1 751.
Commenting on the development, Ecama acting president Bertha Bangara Chikadza expressed concern that these remittances outside the formal financial system limit the government’s capacity to boost forex reserves as such transactions are not subjected to tax.
To address the issue, she urged the government to broaden access to forex services and enhance regulatory frameworks.
“We must start prosecuting those breaking foreign exchange laws, not only the small offenders,” she said.
Scotland-based Malawian economist Velli Nyirongo warned in an interview that the prevalence of forex in informal channels can distort trade and deter foreign investment due to instability and currency risk.
“This practice can also increase arbitrage opportunities with individuals buying dollars at the lower rate and reselling them informally at a profit, further straining the central bank’s limited foreign reserves,” he said.
Nyirongo suggested that liberalising the exchange rate can narrow the gap between formal and informal markets, thereby “restoring confidence by reflecting the currency’s true value”.
In a separate interview, public resource management expert Dalitso Kubalasa said government should improve forex availability by boosting exports, attracting foreign investment, supporting tourism and prioritising fiscal prudence to curb unnecessary forex leakage.
These recommendations come amid delays by government agencies to curb the parallel forex market, including a proposed police deployment by the Ministry of Finance and Economic Affairs.
Meanwhile, Reserve Bank of Malawi and fiscal police are investigating an alleged case of forex externalisation involving Malawian women found with over 300 automated teller machine cards containing forex worth over K1 billion in various currencies.
Financial Intelligence Authority spokesperson Masautso Ebere described the forex issue as “multi-sectoral” and indicated that the authority is collaborating with other entities.
