Malawi has been losing an annual average of $626 million (about K1.096 trillion), translating to $6.258 billion (about K10.95 trillion) of its total trade value recorded in 10 years from 2013 to 2022 to illicit financial flows (IFFs), a new report has shown.
The report by the Global Financial Integrity (GFI) details that such gaps emanate from trade mis-invoicing, the deliberate under or over-statement of export and import values on invoices, widely recognised as a dominant channel for IFFs.
The report notes that IFFs directly crowd out public investment and often force governments to rely on onerous debt, with Malawi currently sitting on a K22.4 trillion debt.
Reads the report in part: “Many African countries, unable to mobilise sufficient revenue due to these leakages, resort to borrowing to finance their budgets, exacerbating debt burdens and diverting future spending to debt service.
earn less forex. | Nation
“IFFs thus create a vicious cycle: as funds haemorrhage out, governments struggle to provide services, undermining citizen welfare and trust and in turn weakening the governance systems that could curb illicit flows.”
Meanwhile, Economics Association of Malawi (Ecama) president Bertha Bangara-Chikadza has said the development shows that Malawi is being deprived of one of the most important sources of government revenue (tax revenue).
She said such funds are needed to finance infrastructure, education, healthcare and other important services provided by the government, as such, IFFs exacerbate sluggish economic growth, poverty and economic inequality.
Said Bangara Chikadza: “IFFs are facilitated by high levels of corruption, weak regulatory frameworks and opaque financial systems. These factors are known to make commercial tax evasion and trade mis-invoicing not only possible but also rewarding.
“Combating corruption remains the first stage in dealing with IFFs. This should be accompanied by clear and concise laws against mis-statement of prices, quantities, qualities and other aspects of trade.”
On his part, economist Christopher Mbukwa said the situation shows a dysfunctional system that cannot detect, let alone stop the loss of resources through illicit routes or that there are accomplices in enforcement institutions who benefit from such deals.
He said: “I think there are lapses or negligence in offices that check goods that are exported outside the country, corruption or indeed lack of capacity in these offices to do due diligence in verifying the invoices vis-à-vis international prices.
“It must start with the political will to ensure offices mandated to monitor and enforce regulations against IFFs are implemented to the letter.”
Such offices, according to Mbukwa are the ministries of Finance, Trade and Agriculture, Financial Intelligence Authority (FIA), the Reserve Bank of Malawi (RBM), Malawi Investment Trade Centre and the Malawi Police Service.
Anti-money laundering expert Jai Banda noted inadequate implementation of laws, weaknesses in regulatory frameworks, corruption and high-level involvement, including lack of capacity as contributing factors.
He suggested reviewing and revising the Financial Crimes Act to address emerging trends and technologies such as virtual assets and digital currencies and enhancing regulations to ensure accurate and timely disclosure of beneficial ownership information.
“Enhance requirements for financial institutions to verify customers’ identities and maintain accurate records and ensure that they have effective systems in place to detect and report suspicious transactions,” said Banda.
By press time at 8pm yesterday, Malawi Revenue Authority (MRA) and Financial FIA did not respond to our questionnaire sent last Thursday.
However, RBM spokesperson Boston Maliketi Banda said trade‑related illicit financial flows remain a serious concern for Malawi.
He said these practices—such as the deliberate under or over‑statement of values on import and export invoices—undermine economic stability, reduce the country’s revenue base and widen inequality.
“Trade‑related IFFs directly strain the country’s foreign exchange position. When exporters under‑declare the value of their exports, the country earns less forex than it should.
“When importers over-invoice their purchases, the economy loses more forex than necessary. These distortions reduce the net supply of foreign exchange in the market and contribute to the recurrent challenges the country faces in maintaining adequate forex reserves,” said Maliketi Banda.
Among others, he said the RBM is implementing several interventions under the Foreign Exchange Act 2025, including validating export declarations and working with MRA to ensure export proceeds are correctly repatriated and fully reconciled.
Maliketi Banda said the central bank is also monitoring import payments made through the banking system and ensuring they match customs‑cleared import documentation and scrutinising and approving capital account transactions, including foreign loans and investments to prevent misuse and improper outflows.
