RBM estimates show 30% forex unaccounted for yearly

Illegal exports is estimated to drain at least 30 percent of the country’s foreign exchange, prompting the Reserve Bank of Malawi (RBM) to launch a crackdown to track the unscrupulous traders.

Speaking in an interview yesterday on the sidelines of a meeting between the central bank and exporters in Lilongwe as part of efforts to manage and improve foreign exchange accountability, RBM Governor McDonald Mafuta Mwale said the illegal foreign exchanges leakages were bleeding the economy.

He said: “It is a difficult question [to quantify] because of the nature of illicit trade, but we say that probably in Malawi at least 30 to 40 percent of our trade is through illicit trade.

“This is just an estimation based on other models in the world, but otherwise it could be more or it could be less.”

The estimate aligns closely with the findings of Global Financial Integrity (GFI) report released in December 2021 which showed that Malawi loses an average of 28.5 percent of its total trade value annually to illicit financial flows.

The 28.5 percent, according to the GFI report, is an average figure in the last 10 years from 2021, but in 2018 alone Malawi recorded a 36.6 percent loss.

In a December 2024 RBM quarterly report it was stated that Malawi’s annual total exports stood at $950.4 million, meaning that the estimated 30 percent loss is equivalent to $285.12 million or one month worth of import cover.

During yesterday’s meeting, RBM indicated that it is investigating up to 100 exporters for not declaring export proceeds amounting to $50 million.

The Foreign Exchange Control Regulation (2024) requires an exporter to declare their export proceeds within 120 days, but the 100 exporters under probe did not comply.

But Akash Deep of HMS Food and Grains, one of the exporters who attended the meeting, argued at length that the newly-introduced regulation mandating the central bank to convert 25 percent of export proceeds into local currency was a punitive measure.

In an interview later, he said: “In my opinion, they should not take the 25 percent from us. Instead, they should allow us access the full money so that we can export more and bring more in the economy.

“I need to import raw materials and other goods to operate so the 25 percent conversion makes planning difficult. They have to reconsider this.”

Responding to this concern in a separate interview, Mafuta Mwale said the measure is meant to protect the economy since government in itself does not generate forex, but depends on stakeholders such as exporters.

“They should not look at this as punishment, but a contribution to the growth of the economy,” he said.

In the Foreign Exchange Control Regulations gazetted in December 2024, RBM announced that it would convert 30 percent of export proceeds and 70 percent of non-governmental organisations (NGOs) which last month was revised to 25 and 50 percent, respectively following an outcry from concerned stakeholders.

In a communication to Bankers Association of Malawi executive director Lyness Nkugula dated March 25 2025, the RBM Governor said the central bank has reduced the mandatory conversion ratio on export proceeds from 30 percent to 25 percent for exporters with exemption from the mandatory conversion of export proceeds for manufacturers meeting criteria issued by the central bank.

Malawi has been struggling with a chronic foreign exchange crisis, characterised by insufficient foreign currency reserves, which has been impacting various sectors of the economy.

The shortage has led to difficulties in importing essential goods, rising inflation and challenges for businesses. While the government has implemented measures like the Foreign Exchange Control regulation (2024) to address the crisis, the situation remains a challenge.