Rising illegal forex trade worries Reserve Bank of Malawi – The Times Group

Curbing Malawi’s Currency Crisis: Strategies to Safeguard Business Interests and Fuel Economic Growth

Post was last updated: August 23, 2025

Key Business Points

  • The Reserve Bank of Malawi (RBM) is cracking down on illegal foreign currency transactions, which are a violation of the Foreign Exchange Act, No. 18 of 2025.
  • Businesses and individuals are required to buy or sell foreign currency through authorised dealers, and failure to do so can result in penalties.
  • A unified and market-clearing exchange rate is crucial to reducing imbalances and supporting Malawi’s growth objectives, according to the International Monetary Fund (IMF).

The Reserve Bank of Malawi (RBM) has expressed concern over the increasing instances of illegal foreign currency transactions taking place across the country. In a statement, RBM Governor Macdonald Mafuta Mwale emphasized that these transactions are a violation of the Foreign Exchange Act, No. 18 of 2025. The Act stipulates that any person, other than an authorised dealer, who intends to buy or sell foreign currency within Malawi, must do so through an authorised dealer. This means that businesses and individuals must use formal channels, such as banks, to conduct foreign currency transactions, rather than resorting to ziwadi za mitundu (informal markets).

The RBM Governor also noted that it is an offence to abet the illegal buying, selling, borrowing or lending of foreign currency, or to assist in the unauthorised transfer of funds to or from a foreign country. This highlights the importance of ukweli wa fedha (financial integrity) in Malawi’s business sector. The mounting demand for forex, coupled with subdued supply, has led to the growth of the forex parallel market. However, this has created distortions, impeded exports, and subsidised some imports, while also encouraging informality and tax avoidance.

The International Monetary Fund (IMF) has also weighed in on the issue, stating that a unified and market-clearing exchange rate is critical to reducing imbalances and supporting Malawi’s growth objectives. The IMF notes that the current regime, with a large and volatile spread between the parallel and official rate, creates distortions, impedes exports, and subsidises some imports. To address this, the IMF recommends eliminating these imbalances by unifying the official and parallel exchange rates, at a level reflecting fundamentals and discounting speculative factors, and stabilising the foreign exchange market. This would require consistency among the de facto exchange rate regime, the monetary policy framework and fiscal policy to ensure sustainable growth. By addressing these challenges, Malawi’s business community can look forward to a more stable and predictable economic environment, which would be conducive to investment and growth.

Source Link

What are your thoughts on this business development? Share your insights and remember to follow us on Facebook and Twitter for the latest Malawi business news and opportunities. Visit us daily for comprehensive coverage of Malawi’s business landscape.

Vanessa Banda
Latest posts by Vanessa Banda (see all)
Post Views: 351