It is now official. The Reserve Bank of Malawi has ordered government ministries, departments and agencies (MDAs) to move their foreign currency denominated accounts (FCDAs) from commercial banks to the central bank.
RBM spokesperson Mark Lungu confirmed the development in an interview yesterday, saying an Executive order is currently in force.
currently in effect
He said he was yet to read the order, but believed that the move could be aimed at shifting the management of forex to the central bank.
Lungu said the government’s point of view could be that commercial banks are not prioritising the allocation of forex to essential and strategic commodities such as fuel and fertiliser.
He said: “Government is at liberty to maintain its accounts at commercial banks or at RBM. Our role as banker to the government will be to facilitate the opening of FCDA accounts for MDAs as per the Executive order.
“As such we will work with the Ministry of Finance through the Accountant General’s office to facilitate the same.”
However, the RBM economist said the Ministry of Finance and Economic Affairs and Accountant General were better placed to give finer details of the directive.
FCDA’s allow users to deposit, withdraw and make payments in multiple currencies and can be used by local exporters, individuals or organisations funded by external sources, diaspora, and people earning income in foreign currency.
Speaking when he toured Raiply Malawi Limited on Tuesday, Minister of Trade and Industry Sosten Gwengwe stated that as a short-term solution to the foreign exchange scarcity, there are some executive directives that have been issued as recently as this week.
He said they hope the scarcity will dissipate in the shortest time possible if foreign currency inflows are being allocated to producers and exporters.
Treasury spokesperson Williams Banda said in a telephone response yesterday that Minister of Information and Digitisation Moses Kunkuyu and Attorney General (AG) Thabo Chakaka Nyirenda were best placed to comment on the executive order.
“If it is an Executive order, then the government spokesperson will be the best to comment. Also, these are legal issues and can ably be dealt with by the AG’s office,” he said.
Efforts to speak to Kunkuyu, Nyirenda and Accountant General Henry Mphasa proved futile as they did not respond to our calls and questionnaires.
Last month, the International Monetary Fund (IMF) placed some fresh scrutiny on RBM’s strategies to promote economic stability and mitigate shocks.
In an article on IMF blog, the bank’s analysts Suman Basu, Sonali Das, Olamide Harrison and Erlend Nier urged central banks to intervene in foreign exchange markets when they become illiquid to counteract excessive currency depreciation in unhedged exposures and to manage inflation expectations in conjunction with raising interest rates.
The analysts stated that the fund’s integrated policy framework recommends using intervention, particularly in liberalised forex markets, during times when markets become illiquid to manage public’s perceptions on inflation.
Malawi is reeling under an acute foreign exchange shortage that has disrupted imports of crucial commodities, including fuel, fertiliser and medicines. In a desperate bid to manage the situation, government has introduced several measures to boost reserves. However, the situation has kept drifting from bad to worse.
