Malawi eases the hard currency squeeze by requiring visitors to pay for lodgings in US dollars

Finance Minister Joseph Mwanamvekha said on Friday that Malawi has instructed foreign visitors to pay for hotel stays in hard currencies such as dollars, euros, and others in an effort to replenish its declining foreign reserves.

Mwanamvekha stated that since the International Monetary Fund’s Extended Credit Facility was canceled earlier this year, foreign reserves have been under pressure during a mid-year budget review. Donors also reduced their budgetary contributions.

The new program instructed tourism enterprises to apply for special licenses that would allow them to deal directly with the central bank on foreign exchange.

Mwanamvekha stated that the actions will assist shut loopholes and save every dollar.

Additionally, exporters would only have 90 days instead of 120 to bring their earnings home, and after paying for their imports, they will be required to give authorities a portion of any remaining foreign currency.

Due to allegations of exploitation by certain participants, the government is now outlawing short-term foreign exchange derivatives, which are intricate contracts that banks employ to hedge against or wager on fluctuations in the kwacha. Only until more stringent regulations are in place will it permit such products once more.