The Malawi Economic Justice Network (Mejn) has warned that a proposed United States bill to impose a five percent tax on all remittances sent abroad could significantly reduce the volume of funds flowing into Malawi from the diaspora, with far-reaching consequences for the country’s already strained foreign exchange position.
Mejn executive director Bertha Phiri said the tax, if passed into law, would add to the economic pressures Malawi is currently facing, particularly in light of recent aid cuts.
“We are already in an environment where donors are cutting funding to Malawi,” she said, citing the United States Agency for International Development’s (USAid) scaling down of financial support. “If this persists, then we can expect that the forex problems might worsen. This could also affect our ability to import fuel and fertiliser. The impact on the economy would be huge.”
According to data from TheGlobalEconomy.com, Malawi received approximately $260.4 million in personal remittances in 2023, down slightly from $264.3 million in 2022. These inflows represented about 1.85 percent of the country’s Gross Domestic Product.
While not as high as in larger African economies, remittances in Malawi remain a critical source of household income and foreign exchange. A significant portion of these transfers originates from Malawians living and working in the United States.
The proposed US legislation, introduced by Republican lawmakers in the House of Representatives, seeks to levy an excise tax of five percent on all international money transfers, with the cost borne by the senders.
The funds would be collected quarterly by the US Treasury Department. The measure forms part of a broader economic and immigration policy agenda linked to former President Donald Trump’s administration.
Remittances play an important role across Africa, often surpassing foreign direct investment and official aid.
Although Malawi receives less in absolute terms, the reliance on these inflows is growing, especially as traditional donor support contracts.
Phiri further warned that taxing formal remittance channels could drive senders toward informal networks, reducing transparency and weakening the capacity of regulators to track inflows and design effective policy responses.
In an earlier interview, a United Kingdom-based Malawian who opted for anonymity said, it has now become a norm to send remittances back home using individuals, rather than authorised dealer banks (ADBs).
Said the source: “We just have to find people who can give me kwacha back home and I either give them pounds here or I make purchases on their behalf at an agreed rate.
“This is much better because now with the official rate at K2 224 against the pound, the rate can go up to K4 000 depending on how we negotiate.”
As debate on the bill continues in the US Congress, governments across Africa—including Malawi—may soon need to weigh diplomatic engagement and domestic contingency planning to cushion the effects of a potential drop in remittance flows.
