Malawi sets luring, payback conditions to devaluation

By Funny Chipala, Nyasa Times

Reserve Bank of Malawi has set both luring and harsh conditions as a compensation to devalue the kwacha against the green-buck  by 10 percent.

The private sector and the donors cried for it, but the central bank has tied a price to the much anticipated devaluation of the local unit.

Much softer measures to lure the Diaspora to send money back home, has seen the central bank waiving all requirements for those abroad opening a Foreign Currency Denominated Account (FCDA) with any of the country’s commercial banks.

“All FCDA holders will be allowed to withdraw foreign currency notes against their FCDA balances,” said bank’s governor Dr Perks Ligoya at a news conference.

Ligoya: Conditions

Another enticing move for those far from home to shore-up the dollar strapped economy is to remove the conversion or retention rule of forex cash deposited into FCDAs.

The RBM had earlier set that those with FCDA can only sale 40 percent of their cash and retain 60 percent into their account.

“We don’t foresee a development where an account holder having say 20,000 US dollars in an account would withdraw all of it at once,” he said.

A tough point now falls on corporate especially those who receive forex in respect of pre-financing arrangements in sectors such as Tea and Tobacco industry.

“These shall maintain separate FCDAs for that purpose. The Authorised Dealer Banks shall ensure that prior to Exchange Control approval for such pre-financing arrangements were obtained in the usual manner,” said Ligoya.

Malawi has devalued the kwacha by about 10 percent against the U.S. dollar to 165, although the new rate is still well short of the currency’s value on the black market, where it is worth around 185 to the dollar.

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