Leveraging Remittances and Labour Export to Mitigate Forex Shortages in Malawi

Abstract

This paper sets out to investigate three objectives namely: to assess the current remittance flows and channels to Malawi; to explore how other countries have successfully unlocked remittance potential and labour export; and to provide policy recommendation on how to optimize remittance inflow through formal channels and formal labour export arrangements. Using Ordinary Least Square Regression the study has established that there is a positive and strong relationship between remittance inflows and forex reserves in Malawi. The study also presents more findings to do with channels for sending remittances, policy suggestions to address barriers to sending remittance through formal channels, policy suggestions to improve labour export arrangements to unlock more forex inflows among others. The paper further provides lessons and recommendations for Malawians authorities to leverage remittances and labour export arrangement to mitigate forex shortages in Malawi. The major lesson secured from the case studies is that Malawi’s legislation lacks the same degree of centralized support and incentives for remittances and labor export which are available in other countries such as dedicated labor export agencies. On policy, legislative, or regulatory suggestions to improve remittance flows to Malawi, one of the recommendations is that the government should consider providing strategic investment initiatives to the diaspora community to make their investments such as designated land space among others. On policy suggestions for improving labour export programs between Malawi and other countries, one of the recommendations is that labour export programs should have a mandatory requirement for a proportion of the employee’s wages/salaries to be repatriated and banked with a Malawian bank account to improve remittances and eventually forex in the country.