Govt reintroduces mandatory sale of export proceeds

The Reserve Bank of Malawi (RBM) has reintroduced mandatory sale of export proceeds, a facility that the Bank introduced in 1994 as an export incentive scheme.

The scheme allowed exporters to retain export proceeds in their Foreign Currency Denominated Accounts (FCDAs).

Dr Wilson Banda Reserve Bank of Malawi Governor-pic by Gracian Jeke Mana

The scheme started with a Retention/Conversion ratio of 10/90 and has progressively been adjusted downwards until it was abolished in March 2015.

Since the abolition of the Retention/Conversion ratio, exporters are allowed to retain 100 percent of export proceeds in their FCDAs.

But in press statement on Friday, RBM Governor Dr. Wilson Banda said the Bank has, however, noted tightness in the foreign exchange market and therefore decided to reintroduce the mandatory sale of export proceeds to Authorized Dealer Banks (ADBs).

Banda said in view of this, all exporters shall sell a minimum of 30 percent of their export proceeds to ADBs while retaining, at most, 70 percent of the proceeds in their FDCDAs.

“Exporters are at liberty to sell the foreign exchange to any ADB offering a better exchange rate, other than the ADB, which received the export proceeds. This sale should be done within two days from the date of receipt of the proceeds,” reads the statement in part.

“In view of the foregoing change, all exporters are immediately required to liquidate 30 percent of what is currently in their FCDAs by selling the foreign exchange to any ADB offering a better exchange rate,” the statement concludes.

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