The Reserve Bank of Malawi (RBM) has amended foreign exchange controls in a move industry players say will motivate manufacturers and exporters.
In a communication to Bankers Association of Malawi executive director Lyness Nkugula dated March 25 2025, RBM Governor MacDonald Mafuta Mwale said the review will promote import substitution and incentivise the export sector while curbing use of informal sources of funds for importation.
Among others, he said the central bank has reduced the mandatory conversion ratio on export proceeds from 30 percent to 25 percent for exporters with exemption from the mandatory conversion of export proceeds for manufacturers meeting criteria issued by the central bank.
The RBM has also reduced the mandatory conversion ratio from 70 percent to 50 percent for non-governmental organisations and introduced a verification requirement for importers to demonstrate that their imports have been financed through the formal banking channel.
In a move to deal with malpractices in the forex market, including facilitation of pass-ons on forex trading, backdoor off-market rate trading arrangements with importers and speculation which influences market panic and eventually move exchange rates in disjoint with prevailing fundamentals, RBM has also reviewed authorised foreign exchange dealer licensing tenure.
Reads the communication in part: “All licences existing will expire on June 30 2025 and new licences will take effect from July 1 2025. Renewal will be annual and subject to satisfying all exchange control legislation requirements, fit and proper assessments for Treasury officers.”
Reacting to the amendments yesterday, National Working Group on Trade and Policy chairperson Frederick Changaya, a former Monetary Policy Committee member, said while this will motivate exporters, the policies should be reviewed holistically to ensure the objectives are realised.
“Changing regulatory space for forex without addressing the real fundamentals would leave us where we are or even worse,” he said.
Former finance minister Joseph Mwanamvekha said the policy change could help to improve foreign exchange reserves and curb the black market.
“The intention is to curb the black market and encourage people to use the banks. So in principle, it is fine, but without forex in the banks, it will not work,” he said.
Market analyst Cosmas Chigwe said reducing the mandatory conversion ratio for exporters and NGOs will improve liquidity within the sector and the verification requirement will help to formalise trade financing and curb speculative currency tradining.
Foreign exchange availability is expected to improve when the tobacco marketing season opens on April 9.
