In Malawi, the dollar has become a scarce commodity, and the authorities have decided to control it down to the last banknote. A notice from the Reserve Bank of Malawi (RBM), recently published in the Government Gazette, bars anyone from holding more than $1,000 in cash, or the equivalent in another foreign currency, without prior authorisation. At the official rate, the cap is worth about 1.75 million kwacha. Signed by Governor George Partridge, the notice comes with two others that govern how money moves across the borders.
Travellers are the first to feel it. To leave the country with more than $1,000, they must now show that the currency was bought from an authorised dealer, or else obtain RBM approval. The national currency is covered too. An ordinary traveller may take out no more than the equivalent of $100 in kwacha. Cross-border traders are capped at the equivalent of $5,000.
The crackdown shows how deep the crisis runs. According to the latest available figures, the country’s foreign exchange reserves have fallen to $600.6 million, barely 2.4 months of imports. The generally recommended safety threshold is three months. With few dollars in the banks, importers struggle to pay their suppliers, and the black market is thriving, with a parallel rate well above the official one. The RBM therefore has two aims: to bring foreign currency hoarded at home back into the banking system, and to stop it leaking to neighbouring countries.
On paper, the measure has its supporters. Leslie Fatch, president of the Financial Market Dealers Association, says it « should assist in reducing hoarding of forex », provided there are « effective enforcement mechanisms ». Bertha Bangara-Chikadza, president of the Economics Association of Malawi, accepts that it could improve liquidity on the official market. She points out, however, that « the large gap between the parallel and official exchange rates » remains « a disincentive » for anyone who might otherwise use the banks.
On the ground, scepticism prevails. « We cannot access the forex in the formal channel, but most of the traders access forex through the black market, » said Steven Yohane, chair of the Cross-Border Traders Association. Analyst Milward Tobias sees the rules as a survival tool: « This measure is not really addressing the foreign exchange shortage, but it’s a measure to just help survive within the crisis. » Economics lecturer Edward Leman agrees: « Ultimately, it is difficult to resolve structural economic problems through regulation alone. »
The real problem lies elsewhere, as economist Velli Nyirongo puts it: « The central issue is not simply how Malawi controls the foreign exchange it has, but how it creates the conditions to generate significantly more of it. » That means farm exports, foreign investment, diaspora remittances and donor support. As long as these sources remain too weak, the $1,000 cap may do little more than push more trade into the informal economy.