Reserve Bank of Malawi (RBM) says it is devising strategies to cushion the economy from the impact of the temporary ban on foreign aid imposed by United States of America President Donald Trump.
Trump’s order on aid put on hold $284.7 million (about K493.7 billion) financing to Malawi, according to data published on the foreign assistance portal on the United States Agency for International Development (USAid) website.
In a written response yesterday, RBM spokesperson Boston Maliketi Banda said the temporary ban on foreign aid is a concern for many developing countries which are ordinarily strategising on how to overcome the shock.
However, he said such policy shifts in traditional donor countries like the US are driven by the need to better the lives of their citizenry, as per the ambitions of any administration.
“This is one of the reasons the governor [of RBM] has embarked on an engagement drive with key stakeholders, including the media to collaboratively develop practical and implementable strategies to address such shocks and sustainably address the forex supply shortages in the country,” said Maliketi Banda.
He further said RBM has welcomed and is promoting the use of plastic money for both domestic and cross-border payments, a suggestion made by money market experts during a Monetary Policy Technical Committee Forum in Blantyre.
Banda said that the use of plastic money such as credit and debit cards can contribute to a decrease in the supply of physical dollar notes on the parallel market.
Last month, economists expressed fears that the temporary ban on aid could worsen the forex shortages the country is experiencing in the short to medium term.
RBM data show that forex reserves in November 2024 had dropped to $516.9 million or 2.1 months of import cover far below the 3.9 months of import cover recommended by multilateral institutions such as the World Bank and the International Monetary Fund (IMF).
