Malawi financial dealers set to curb forex malpractices

Financial Market Dealers Association (Fimda) has moved in to arrest the pricing of foreign exchange without basis, a situation that has caused the kwacha to experience a steep depreciation in recent weeks.

Fimda president Alfred Nhlema, speaking on Saturday on the sidelines of the association’s annual lake conference at Sun N Sand Holiday Resort in Mangochi, noted that due to recent policy changes they have experienced challenges in terms of forex pricing.

He said they have since developed and adopted a code of conduct for the dealers.

Malawi Government last year devalued by 49 percent and floated the kwacha which has seen the local unit being priced according to the dictates of the market.

But as the economy enters the lean period, the kwacha has been depreciating against major trading currencies although other indicators, including foreign exchange reserves do not point to that.

This has compelled analysts to blame commercial banks for pricing of foreign currencies without basis, thereby causing panic on the market.

But Nhlema noted that they have adopted policy changes such as the liberty in the pricing of foreign exchange in the hands of the commercial bank treasuries.

“As an association, we have moved fast to come up with the code of conduct which was adopted on October 1. We will come up with proper guidelines in terms of market operations.

“What we have noted is that there have been problems in terms of pricing. The adoption of the code of conduct will bring proper behaviour in terms of pricing of foreign currencies. Since the code of conduct has been adopted, we are sure we will perform according to rules,” he said.

Nhlema said the pricing of foreign exchange has caused rifts between banks in terms of pricing because what normally happens is that these resources sit with various commercial banks in the economy so if a commercial bank buys foreign exchange at a higher rate there are always issues.

He said that what has happened over the past years is to normalise relations between the banks.

Reserve Bank of Malawi (RBM) Deputy Governor (economic sservices) Naomi Ngwira, who was guest of honour at the conference, noted that apart from the code of conduct there are also other rules and regulations.

“The financial market dealers are important as far as the delivery of the monetary policy in concerned. The Reserve Bank is responsible for making monetary policy and often we announce a bank rate. The bank rate is expected to change how the dealers trade among themselves,” she said.