By Mercy Matonga:
The Bankers Association of Malawi (Bam) has commenced court proceedings challenging the Exchange Control Regulations (ECR) which the Reserve Bank of Malawi issued recently.
Bam Chief Executive Officer Lyness Nkungula confirmed the development to Malawi News.
“I can’t say much, but I can confirm,” Nkungula said during a phone interview.
The body’s lawyer, Kalekeni Kaphale, also confirmed the legal action.
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He said the association is seeking “a judicial review of several aspects of the regulations in question.”
Ministry of Justice spokesperson Frank Namangale acknowledged the case, and said the Attorney General’s office is contesting the matter.
“It is true that the Bankers Association of Malawi has gone to court to challenge the new Exchange Control Regulations (ECR), which were duly gazetted on December 16, 2024,” Namangale said.
The regulations, published in the Gazette dated December 13, 2024, introduced new requirements for private and public institutions in managing foreign currency.
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According to the government, the regulations aim to control the opening and operation of foreign currency accounts at the Reserve Bank of Malawi (RBM), enforce the mandatory conversion of funds in these accounts, ensure compliance with foreign exchange laws, and prevent illegal activities.
Among the provisions, public institutions and organisations must open foreign currency accounts with the RBM for all funds received in foreign currency.
In addition, institutions are required to convert 80 percent of incoming funds into local currency, retaining only 20 percent in foreign currency.
Further, access to these funds is subject to strict guidelines, including specific procedures for withdrawals or transfers.
For funds used within Malawi, transfers must be converted into local currency based on the official exchange rate at the time of the transaction.
The regulations also impose severe penalties for non-compliance, including substantial fines and imprisonment for individuals or organisations found in violation.
Over the past two months, the government has announced measures which some deem to be aimed at arresting the persistent forex crisis in the country.
In December, RBM issued a circular introducing conditions for dealings of Authorised Dealer Banks (ADBs) in connection with withdrawal of foreign currency by diplomatic offices and staff.
RBM said diplomatic offices shall on application to an ADB holding their Foreign Currency Denominated Account, be allowed withdrawal of foreign currency to a maximum of $15,000 or equivalent in any foreign currency per calendar month for operations.
The circular also said ambassadors and consuls holding foreign currency denominated accounts shall on application to the holding ADB be allowed withdrawal of foreign currency to a maximum of $3,000 or equivalent in any foreign currency per calendar month.
Amid criticism that this was a result of the forex shortage, RBM Deputy Governor for Economics and Regulation Macdonald Mafuta Mwale said the regulation allowed the diplomatic offices and staff to access their money in foreign cash from banks.
He said this was prohibited before as they were allowed to access their money in Malawi Kwacha only.
He further said the circular was a result of a meeting with the diplomatic community representatives.
Late in November, RBM also directed ministries, departments and agencies to move their foreign currency denominated accounts from commercial banks to the Central Bank.
Earlier that month, the Central Bank also directed commercial banks to transfer foreign currency denominated accounts in their custody to it.
