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Malawi Mandates Dollar-Only Payments in Hotels to Bolster Foreign-Currency Reserves

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  Published in Business and Finance on Friday, November 21st 2025 at 11:52 GMT by reuters.com

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Malawi’s “Dollar‑Only” Move: A New Strategy to Flush Hard Currency Into a Tight Economy

On 21 November 2025, the Malawian government announced a bold shift in its tourism policy: all hotels and guesthouses will now be required to accept only U.S. dollars (or other major currencies) for accommodation. The policy, implemented by the Ministry of Finance under Minister Charles Kamuzu, is designed to ease the country’s chronic “hard‑currency” squeeze, a problem that has lingered since the 2018 kwacha devaluation and has left Malawi unable to meet its rising debt obligations and import bills.

Why the Dollar‑Only Rule?

Malawi’s currency, the kwacha (MWK), has been under severe pressure for several years. A sharp drop in export earnings—mainly from copper and maize—coupled with a surge in import costs, has forced the central bank to hoard foreign exchange in order to pay for essential imports such as fuel, medicine, and food. As a result, the government has had to cut subsidies, tighten lending, and borrow more from external lenders, creating a vicious cycle of debt and inflation.

“We are seeing the kwacha erode at an alarming rate, and we have to be proactive in securing foreign currency,” Kamuzu said in a press briefing. “Tourism is one of the few sectors that generates dollars directly, and we want to capture that flow before it leaks out.”

By mandating that all lodging providers charge in dollars, the Ministry aims to:

1. Guarantee that every foreign tourist pays the government in hard currency, thus adding to the country’s foreign‑exchange reserves.
2. Reduce the informal exchange of dollars into kwacha, a practice that had previously been rife as tourists and hotel owners swapped dollars for local currency to pay suppliers.
3. Increase transparency and regulatory oversight over the tourism sector’s financial flows, making it easier to track and audit the money that enters the economy.

The policy also includes a “tourist levy” of 5 % on the dollar price, which will be directly earmarked for the Ministry of Finance’s “Foreign Currency Accumulation Fund.” This fund will be used to pay off external debt and to cover the costs of importing critical goods that Malawi can no longer produce locally.

How It Works

Under the new regulation, every hotel and guesthouse—regardless of size—must:

• Accept only U.S. dollars (or other major currencies such as euros or British pounds) for all bookings, deposits, and services.
• Display the dollar price on all rate cards, booking sites, and advertising.
• Maintain a separate bank account for foreign currency receipts, with a mandatory minimum balance of MWK 10 million per month to ensure liquidity.
• Submit a monthly report to the Ministry of Finance detailing total dollars collected, the tourist levy paid, and any dollar reserves held.

Tourists who pay in kwacha will be charged a 10 % conversion fee to discourage the use of local currency. Hotels that refuse to comply with the dollar‑only rule will face a fine of MWK 100 million and a possible suspension of their license.

The policy is effective from 1 January 2026 and will be phased in over six months to give businesses time to adapt. The Ministry has also announced a training program for hotel staff on foreign‑currency accounting and has pledged to provide subsidised loans to help hotels upgrade their payment systems.

Industry Reaction

Reactions among the tourism industry have been mixed. The Malawi Hotel Association (MHA) released a statement saying that while the policy could “strengthen our sector’s financial footing,” it also adds “additional administrative burdens and potential losses in revenue.”

“Tourists are already paying a premium to stay in Malawi,” said MHA chairperson Stella Phiri. “Forcing them to use dollars and adding conversion fees could make our hotels less competitive, especially against other East African destinations that still accept kwacha.”

On the other hand, the Malawi Tourism Board (MTB) welcomed the move. In a joint press release with the World Bank, the MTB highlighted that the policy is “a pragmatic step that aligns with the World Bank’s recommendation to deepen the hard‑currency base and enhance monetary stability.” The World Bank’s Regional Director for East Africa, Ms. Anita Goma, praised the policy as “a creative solution to a pressing problem” and assured that the bank would monitor its implementation closely.

Several hotels, however, expressed concern over the potential loss of local customers. “Our domestic clientele will be hit hard,” said a spokesperson for the 4‑star Grand Royal Hotel in Blantyre. “The policy will make our rooms effectively unaffordable for locals, who might be forced to stay at budget accommodations that still accept kwacha.”

Broader Economic Context

The dollar‑only policy comes amid a broader package of reforms designed to stabilize Malawi’s economy. These include:

• A tax incentive for foreign‑owned businesses that reinvest in the country, aimed at encouraging more foreign investment.
• A restructuring of the national debt with new, longer‑term terms negotiated through the International Monetary Fund (IMF) and the African Development Bank (AfDB).
• An import‑substitution program focused on boosting the production of rice, maize, and other staples to reduce the need for imports.

Analysts say that while the dollar‑only rule will help bring hard currency into the country, it may also strain the tourism sector if visitors perceive the country as “price‑inflated” relative to competitors such as Zambia, Tanzania, and Kenya.

“Malawi’s appeal has always been its wildlife and cultural heritage,” said economist Dr. Chiwanda Chikafu of the University of Malawi. “The real test will be whether this policy can be implemented smoothly without eroding the very tourism that it is meant to protect.”

Looking Ahead

The Ministry of Finance has indicated that it will review the policy after six months to assess its impact on foreign‑exchange reserves, tourism revenue, and the overall health of the hospitality sector. If successful, similar measures could be considered for other sectors—such as hotels, restaurants, and travel agencies—to further consolidate Malawi’s hard‑currency position.

For now, tourists planning a visit to Malawi should prepare to pay in U.S. dollars and be aware that the exchange rate will reflect the new conversion fees. Domestic travelers may need to adjust their expectations, as some hotels may no longer accept kwacha.

In an economy where every dollar counts, Malawi’s dollar‑only rule is a gamble that may pay off in hard currency but could also change the landscape of tourism in ways that remain to be seen.