Malawi has recorded a 33 percent drop in remittances from its citizens working or living abroad to $78.96 million (about K58.4 billion) in the five months to May this year, the Reserve Bank of Malawi (RBM) figures show.
This is a drop from $118.03 (about K87.3 billion) received during the same period last year.
RBM spokesperson Mbane Ngwira in an interview on Friday said the drop is largely due to the economic crisis brought about by the Covid-19 pandemic and lockdown in some countries which has triggered a fall in wages and employment of migrant workers.
He explained that the current drop if prorated could give an annual reduction of around $100 million (about K74 billion) and ultimately affect the current account balance.
Said Ngwira: “We have seen a significant drop in the amount of funds the country receives through remittances. This practically means we may not reach our target for 2020 pegged at $300 million [about K222 billion].
“This will also have a negative impact on the current account balance.”
The current account records a nation’s transactions with the rest of the world, specifically its net trade in goods and services, net earnings on cross-border investments and net transfer payments.
In a written response on Friday, economic statistician Alick Nyasulu agreed that the current account balance will be negatively affected by the drop in remittances.
“With about 40 percent of budget support cut since 2013 and tobacco earnings reduced by half over an eight-year period, Malawi needs all the foreign exchange it can get; hence, the decline in remittances could reflect negatively on the country’s balance of payments [BoP],” he said.
BoP is a statement of transactions made between entities in one country and the rest of the world over a defined period of time.
The 2020 Annual Economic Report shows that in 2019, the country recorded a current account deficit of $1.6 billion (about K1.18 trillion), which is expected to slightly worsen by 2.6 percent to $1.64 billion (about K1.21 trillion) in 2020.
The report shows that the deficit is expected to further worsen by 2.7 percent in 2021 to $1.7 billion (about K1.25 trillion).
The World Bank has also predicted that global remittances will decline by 20 percent this year with sub-Saharan Africa remittances projected to decrease by 23.1 percent due to the economic crisis induced by the Covid-19 pandemic.
In 2019, formal receipts from the diaspora amounted to $265.7 million (about K196.6 billion) against a target of $250 million (about K185 billion).