Money market experts have asked the Reserve Bank of Malawi (RBM) to ensure that the country quickly transitions to the use of plastic money to cut back on the supply of dollars on the parallel market to stabilise the exchange rate.
Capital Markets Association of Malawi and Financial Market Dealers Association (Fimda) made the suggestion on Friday in Blantyre during the Monetary Policy Technical Committee Forum.
The meeting was held after the Monetary Policy Committee (MPC) maintained the policy rate, the rate at which commercial banks borrow from the central bank as lender of last resort at 26 percent, citing positive inflation outlook, which is projected to ease in 2025 to 24 percent from 32.2 percent in 2024.
However, despite the anticipated slight improvement in inflation, the persistent foreign exchange shortages, which continue widening the gap between the official and parallel rates, dominated the discussions with the Capital Markets Association chairperson John Kamanga suggesting that the thriving black market is supplied by people who also travel outside the country.
He proposed that RBM should completely shift to plastic money for government officials traveling abroad, saying the tendency of giving out hard cash is supplying the black market with dollars.
He said: “My proposal is to move away from the cash aspect and this must start from the top.
“You will find out that when officials travel outside the country, they prefer to have cash and not plastic money.”
In his presentation, Fimda president Lesley Fatchi said the central bank should align the exchange rate with the market forces.
He said companies are already accessing the dollar on the black market at as high as K4 000.
