RBM hopeless on black market
Reserve Bank of Malawi (RBM) deputy governor William Matambo has said the central bank does not have resources to regulate the value of forex on the black market which is currently soaring.
The dollar on the informal market is selling at K1 800 against an official exchange rate of K1 063.
Speaking on Thursday when he met the Parliamentary Committee on Government Assurance and Public Sector Reforms on efforts that RBM is making in addressing the forex shortage and increase in value of the dollar, especially on the black market, Matambo admitted that it is hard for the central bank to have an impact on the rising rate of the dollar on the black market as it does not have enough reserves.
He said: “With the situation we are in it is not very easy for us to reign in on the black market because that requires you to have adequate reserves. The thing which we don’t have in abundance.
“The reserves that we have are only enabling us to intervene on strategic reserves.”
Matambo, however, said the black market is stealing from Malawians by overvaluing the dollar, calling on law enforcement agencies to come in to fight the black market.
He said it is only by discouraging the informal market that any available forex can move into the formal market.
Said the deputy governor: “What we require most importantly is for our colleagues in the law enforcement departments to reign in on that because it causes distortion in an economy
“There could be a misalignment of the kwacha in terms of the official rate, but it should not go as far as K1 800. That is really extortion. They are just taking advantage of the situation and they are kind of stealing from people and we need the law enforcement agencies to reign on that.”
In his remarks, the committee chairperson Noel Lipipa challenged RBM that it will not be possible for the law enforcement agencies to flush out the black market, saying the structures of the black market are currently sophisticated.
He said the black market is in various forms and the one where big deals happen is where people in other countries pay for goods in dollars or other foreign currency and they get their money here in Malawi through bank accounts and other platforms.
Said Lipipa: “Your reliance on the law enforcement agency with the type of parallel market that is happening it will not work.
“They are way advanced. When I say advanced, they are miles away.”
He said besides the illegal forex trade, the informal market also promotes tax evasion, with people under-declaring goods purchased through the informal market.
The chair advised that the solution will be to inject more forex in the formal market.
Currently the country is facing an acute forex shortage which is affecting imports of goods. Low forex supply has also seen kwacha losing value and prices of goods skyrocketing. Government is currently pushing for the extended credit facility with the International Monetary Fund which could further unlock support from other development partners to rake in more forex.
