RBM ready to free forex to exporters

The Reserve Bank of Malawi (RBM) Governor Charles Chuka has said the central bank is ready to free all the foreign exchange that exporters earn from their export consignments.

Chuka has since described last week’s change in the policy as significant, saying it will guarantee the availability of more foreign currency to local exporters; hence, incentivise them to expand the country’s export base.

The governor was commenting on the revision of the retention/conversion ratio to 80/20 from 60/40 with immediate effect.

Following the adjustment, all the exporters will be allowed to retain 80 percent of their export earnings in their Foreign Currency Denominated Accounts (FCDAs) and sale 20 percent to authorised dealer banks (ADBs).

Prior to the adjustment, exporters were only allowed to retain 60 percent of their export earnings and sale 40 percent to ADBs, a situation which has been worrying local exporters as they argued it denied them the much-needed foreign currency.

“The change [in the retention/conversion ratio] is a significant change to exporters as has been welcomed by many. Our intention is to eliminate this requirement,” said Chuka in Lilongwe on Tuesday. He was addressing a news conference at the end of the second review of the Extended Credit Facility (ECF) programme by the International Monetary Fund (IMF).

Eliminating the retention requirements for export proceeds as Chuka foresees, would imply that exporters would be allowed to retain 100 percent of their export proceeds in their respective FCDAs.

He said RBM aims to induce the availability of foreign currency in the country and help the country meet its import demand for strategic commodities.

“We think in terms of providing signals [in the economy] we are on the right path,” he said.

In a statement released last week, the RBM said it will continue to monitor the situation with a view to eventually eliminate the export proceeds.

He said the move to adjust the ratio will help Malawi to move closer to the exchange control liberalisation framework enshrined in protocols under Southern Africa Development Community (Sadc) and Common Market for Eastern and Southern Africa (Comesa).

IMF chief of Mission for Malawi Tsidi Tsikata on Tuesday said the fund was pleased with RBM’s move to adjust the ratio.

In 1994, RBM introduced an export incentive scheme to allow exporters retain their export proceeds in their FCDAs.

The scheme started with a retention/conversion ratio of 10/90 percent in 1994.

Mid 2011, the Commerce, Industry and Tourism Committee of Parliament recommended that local exporters retain up to 100 percent of their export earnings instead of 60 percent.

In its report tabled and debated in Parliament, the committee argued the move could help ease challenges that businesses face when acquiring foreign exchange.