Forex situation to determine regulation review, says RBM

The Reserve Bank of Malawi (RBM) says monetary authorities will review the 30 percent mandatory sale of export proceeds regulation as the foreign exchange situation improves.

The position by the central bank follows calls by the Institute of Chartered Accountants in Malawi (Icam) along with other industry players for the central bank to consider revising the 30 percent mandatory sale of export proceeds regulation to provide incentives to exporters who bring in foreign exchange through legal channels without mandating a specific percentage conversion.

In an interview on Wednesday, RBM spokesperson Mark Lungu said the regulation is being monitored.

He said: “The mandatory surrender requirement was re-introduced as a temporary measure to allow and support importation of strategic commodities amid foreign exchange supply challenges the country has been facing.

“The situation is being monitored and authorities will continue reviewing it and take corrective measures as the situation improves.”

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 while retaining 70 percent of the proceeds in their foreign currency denominated accounts.

Icam chief executive officer Noel Zigowa said in an interview on Thursday the imposition of mandatory conversion of export proceeds has prompted some exporters to consider smuggling goods or bypassing official channels.

He said there is need to introduce measures that encourage legitimate exports without imposing restrictions that promote illicit practices, striking a balance between revenue collection and export promotion.

“Exporters, aiming to avoid mandatory conversion, might resort to underreporting income to lower their tax liabilities, resulting in reduced income tax collections for the government,” said Zigowa.

Trade experts say the surrender requirement has failed to support the forex supply to eradicate imbalances in the interbank market. n