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RBM, NGOs discuss forex regulations

Non-governmental organisations (NGOs) have proposed a review of newly-introduced Exchange Control Regulations, 2024 to strike a balance between accountability and operational efficiency.

The NGOs made the proposals during a meeting with the Reserve Bank of Malawi (RBM) management in Lilongwe last week.

A team of eight NGO leaders led by the Council for NGOs in Malawi (Congoma) met with RBM Governor MacDonald Mafuta-Mwale, his deputy Kisu Simwaka and five directors.

NGO leaders engaged him last
week: Mafuta-Mwale. | Nation

The central bank introduced the Exchange Control (Holding Foreign Currency Denominated Accounts and Mandatory Conversion of Foreign Currency Receipts) Regulations, 2024 on December 12.

The regulations, issued under Government Notice No. 73, seek to enhance financial accountability, mitigate illicit financial flows, and support the country’s economic stability.

However, during the meeting, the NGOs observed that while the measures aim to address critical financial management issues, they also pose substantial challenges to the NGO sector, which relies heavily on foreign funding to implement essential programmes and services across the country.

Both RBM and Congoma officials were not available yesterday for comment.

But in a statement presented to RBM, the NGOs argued centralised financial controls may inadvertently erode the independence of NGOs, especially those advocating for governance, transparency, and human rights.

They also observed the new regulations would stifle long-term planning where donor partners will not give upfront all the resources earmarked for a project.

While appreciating the objectives of the regulations, the NGOs urged RBM and the Ministry of Finance to consider the unique challenges the organisations face, arguing a collaborative approach to refining the regulations would ensure that accountability measures are upheld without jeopardizing their critical developmental work in the country.

The NGOs are also requesting permission to allow them to retain foreign currency receipts and convert them when they need local currency.

Reads the NGOs’ statement: “Smaller NGOs, with limited administrative capacity, are at higher risk of non-compliance and penalties… Increased scrutiny could deter donor confidence and impact the credibility of the sector.”

A summary of the engagement issued after the meeting, stated that having heard from NGOs, the bank was touched by the “practical examples” of how the regulations are already affecting the NGO sector.

On request to retain foreign currency receipts and convert them when necessary, RBM said it will come back to Congoma after discussing the issues internally on whether or not the voluntary conversion should be at the need of the resources or at the receipt of the foreign currency.

Key provisions in the regulations include mandatory conversion of foreign currency receipts, restrictions on forex dealings, and stringent compliance requirements for NGOs.

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