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Malawi reintroduces mandatory sale of export proceeds

The Reserve Bank of Malawi (RBM) has reintroduced a measure that requires companies to dispose of part of their export…

The Reserve Bank of Malawi (RBM) has reintroduced a measure that requires companies to dispose of part of their export proceeds to the central bank in a move aimed at improving the availability of foreign currency in the country.RBM governor Wilson Banda said Monday that the move was necessitated by the recent “tightness in the foreign exchange market”. 

The RBM introduced an export incentive scheme in 1994 that allowed exporters to retain export proceeds in their Foreign Currency Denominated Accounts (FCDAs). 

The scheme started with a retention/conversion ratio of 10/90 and was progressively adjusted downwards until it was abolished in March 2015. 

Since abolition of the retention/conversion ratio, exporters have been allowed to retain 100 percent of export proceeds in their FCDAs.

“The Bank has, however, recently noted tightness in the foreign exchange market and therefore decided to re-introduce the mandatory sell of export proceeds to Authorized Dealer Banks (ADBs),” Banda said in a statement.

He added: “With immediate effect, 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 FCDAs.”

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, Banda said. 

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