RBM relaxing forex controls
In its pursuit to liberalise the foreign exchange market, the Reserve Bank of Malawi (RBM) has stopped the requirement by authorised foreign exchange dealers to endorse travellers’ passports with the amount of forex bought.
The Malawi Economic Empowerment Action Group (Meeag) executive director Lewis Chiwalo has come in swiftly to condemn the RBM move, arguing it will result in the depletion of the little foreign exchange that the country has.
“What can stop someone from acquiring foreign exchange from a number of banks and divert it,” queried Chiwalo on Tuesday.
“We need to protect the little foreign exchange that we have. The country has little forex and it can easily be depleted with this move by the RBM which has the potential to increase malpractices by some individuals.”
Global trends
But RBM spokesperson Ralph Tseka on Tuesday assured that the banks will strengthen their monitoring mechanism and allocate the foreign exchange in line with existing guidelines to ensure that there is no foul play.
He explained that the RBM uses the Foreign Exchange Statistical Database System (Fesds) which tracks any foreign exchange sales by commercial banks, stressing that those who acquire foreign exchange for dubious means will be easily traced and taken to task.
“We are looking at the global [trends]…we are moving towards liberalisation of the exchange controls. We already started that with the floatation of the kwacha. It [the discontinuation of the requirement to endorse travel allowance in passports] is the international standard and is the best practice,” said Tseka.
The exchange control circular number 2/2013 which Business News has seen signed by RBM Governor Charles Chuka says the exchange control move is in accordance with the Southern Africa Development Community (Sadc) and Common Market for Eastern and Southern Africa (Comesa) regional integration agenda.
“However, authorised foreign exchange dealers may endorse passports with amount of foreign exchange purchased if so requested by the travellers themselves,” reads the circular in part which supersedes circular number 02/2010 of August 11 2010.
Regional guidelines
The circular has asked all foreign exchange dealers to ensure that the foreign exchange they allocate to travellers is in line with existing guidelines, adding that the RBM, on its part, will ensure that all forex allocations by authorised foreign exchange dealers are monitored.
This move comes hot on the heels of another one in February this year in which the RBM revised the retention/conversion ratio to 80/20 from 60/40. This allows exporters to retain 80 percent of their export earnings in their Foreign Currency Denominated Accounts (FCDAs) and sell 20 percent to Authorised Dealer Banks (ADBs).
Prior to the adjustment, exporters were only allowed to retain 60 percent of their export earnings and sell 40 percent to ADBs, a situation that was worrying exporters because it denied them of the much-needed foreign exchange.
RBM has since indicated that it is ready to free all foreign exchange that exporters earn from their exports.
