Scrap off 30% forex conversion rule

By Wezzie Gausi:

Exporters have asked the Reserve Bank of Malawi (RBM) to scrap the policy requiring 30 percent of export earnings to be converted into Malawi Kwacha, arguing that the rule is limiting access to foreign exchange needed for reinvestment and importation of essential raw materials.

During a meeting organised by the RBM in Lilongwe, stakeholders in the export sector raised concerns that the forex surrender requirement was stifling production and weakening Malawi’s export competitiveness.

Rab Processes Ltd General Manager – Commercial, Bashir Sama, said local manufacturers were being unfairly affected by the regulation.

“As manufacturers, we depend on commodities from farmers, and to ensure supply, we also have to provide inputs like fertiliser, which we import. But how do we do that if 30 percent of our forex being withheld?” Sama said. “We are simply asking the Reserve Bank to allow us to use more of what we earn.”

Sama also highlighted the disparity in how excise duty was applied between imports and locally made products.

“When others import, they pay excise on cost price. But when we manufacture locally, we are charged excise on the selling price. That is unfair,” he said.

Lake Malawi Aquaculture Managing Director David Patrick Nkhwazi also backed calls to revise the forex surrender requirement.

“Exporters need full access to their forex earnings to grow operations and invest in their value chains,” Nkhwazi said.

But RBM Governor Macdonald Mafuta Mwale said the policy was introduced to help the country secure forex for essential national imports.

“Yes, it may seem like we are punishing those doing the right thing, but the government does not generate forex. We rely on exporters.

“The 30 percent we retain is used for importing fuel, medication, and fertiliser— items that are critical for the economy.”

Mafuta Mwale said the central bank would continue engaging exporters and other stakeholders, adding that a larger, inclusive forum was being planned to review broader issues affecting the export sector.