National Advocacy Platform (NAP) has expressed concern that the new restriction on foreign exchange management would compromise non-governmental organisations’ (NGOs) operations in the country.
NAP, a coalition of over 250 civil society organisations in Malawi, was responding to forex controls published by the Ministry of Finance and Economic Affairs to bolster the country’s forex reserves.
The new Exchange Control Regulations 2024 on holding foreign currency denominated accounts and mandatory conversion of foreign currency receipts were gazetted on December 13 2024.
The new control measures, which the government says are meant to curb illicit financing and illegal forex trading, requires NGOs to provide annual reports to the government and convert 70 percent of their forex into kwacha, among other regulations.
In a statement signed by NAP executive chairperson Benedicto Kondowe, the coalition expressed concern that the new law will “present significant challenges to the financial sustainability, operational efficiency, and independence of NGOs”.
It reads in part: “Such forced conversions expose NGOs to exchange rate losses, reducing funding for critical programmes and disproportionately affecting international NGOs managing multi-currency projects.
“This disproportionately affects international NGOs and those managing multi-currency projects, as it limits their ability to hedge against market volatility.”
In an earlier interview, Financial Market Dealers Association president Lesley Fatch said the mandatory retentions would negatively affect commercial banks’ balance sheets.
“The prescribed conversions will benefit the RBM, which will be the ultimate buyer of the prescribed conversions.
“This will affect the availability of foreign currency for importers, especially since the law is unclear on whether the RBM will have a mechanism to return the forex to the market,” he said
