Exporters seek relief on forex measure

Exporters have urged the Ministry of Trade and Industry to review the 30 percent mandatory sale of export proceeds regulation, describing the foreign exchange measure as prohibitive to export growth.

Speaking in an interview on the sidelines of a meeting with the Minister of Trade and Industry Sosten Gwengwe and his officials on Thursday in Blantyre, the exporters argued that with recent injection of foreign exchange into the economy, there must be an exemption to manufacturers who are generating their own forex through exports using formal channels to finance their imports for production.

The Reserve Bank of Malawi (RBM) last year reintroduced the surrender requirement under the Exchange Control (Repatriation of Export Proceeds and Operations of Foreign Currency Denominated Accounts) Regulation 2022.

The mandatory sale of export proceeds was re-introduced to ensure foreign exchange availability in the country.

Under the provision, all exporters are required to sell a minimum of 30 percent of their export proceeds to authorised dealer banks (ADBs) while retaining 70 percent of the proceeds in their foreign currency denominated accounts.

But speaking in an interview on the sidelines of the meeting, Bakhresa Malawi Limited human resource and compliance manager Richard Tchereko said surrendering or converting 30 percent of export proceeds at a prevailing buying exchange rate of ADBs is on the higher side and could demotivate local manufacturers in value addition.

He said: “Much as there were good intentions for the country, but now that after devaluation there is substantial injection of forex, we strongly suggest that the rate should be  revisited and removed to encourage exports in line with the National Export Strategy II.

“If not, then there must be an exemption to companies that are generating their own forex through formal exports with to finance their imports for production by hedging themselves from forex volatility.”

Tchereko said if nothing is done, it will encourage informal exports by other business players, motivate use of the parallel forex markets by some businesses to get a higher rate than that offered at the bank counter.

On his part, Malawi Investment Group managing director and former Manufacturers Association of Malawi chairperson Ahmed Sunka said he hopes that as the economy builds its forex reserves, the surrender requirement will be revised downwards.

Meanwhile, trade expert say the surrender requirement has failed to sufficiently support the forex supply to eradicate imbalances in the interbank market.

Consequently, RBM devalued the kwacha by 25 percent in May last year and effected another 44 percent devaluation in November this year to align the exchange rate with market fundamentals.

Speaking at the meeting, Gwengwe said they will look into the suggestions for a ‘win-win’ situation, indicating that after stabilising the economy, the biggest agenda is how and where to generate forex to grow the economy.