REMITTANCE TAX COULD HURT MALAWIAN HOUSEHOLDS — MEJN

The Malawi Economic Justice Network (MEJN) has warned that a proposed U.S. bill imposing a 5% tax on all international money transfers could reduce remittance inflows to Malawi, worsening the country’s fragile foreign exchange situation.

MEJN Executive Director Bertha Phiri said the tax would increase economic pressures amid recent donor aid cuts, such as USAID’s scaling back of support. “This could deepen forex shortages and impact essential imports like fuel and fertiliser,” she warned.

In 2023, Malawi received around $260 million in remittances, about 1.85% of its GDP. Although smaller than larger African economies, these funds remain vital for households and foreign exchange reserves, especially those sent from Malawians in the U.S.

The bill, introduced by Republican lawmakers, aims to collect the tax quarterly through the U.S. Treasury and is part of a broader policy agenda linked to former President Trump.

Phiri cautioned that taxing formal remittance channels might push more transactions into informal systems, reducing transparency and making it harder for Malawi to monitor inflows and plan effectively.

A UK-based Malawian shared that informal transfers are already common, often yielding better exchange rates than official channels.

As the bill progresses, Malawi and other African governments may need to prepare diplomatically and domestically to mitigate potential remittance declines.