The Reserve Bank of Malawi (RBM) has said it is critical to have the Foreign Exchange Bill enacted this year to seal loopholes in foreign exchange externalisation, as the country’s foreign exchange reserves grow on a daily basis.
The Foreign Exchange Bill is expected to repeal the current Exchange Control Act.
Speaking on the sidelines of a two-day seminar for financial services lawyers, RBM General Counsel and Secretary, Samuel Malitoni, said the central bank already presented the bill to Ministry of Justice for scrutiny before it is tabled in Parliament.
“Currently the Ministry of Justice is finalising the paper for presentation at Cabinet level. We are hoping the bill will be tabled in Parliament and passed this year,” he said.
Malitoni said the Exchange Control Act is very old, as it is a 1989 legislation, which aimed at controlling foreign exchange in the country.
He, however, said currently the world has moved out of controlling foreign exchange to managing it.
“What we are trying to do at the Reserve Bank is that we are proposing that foreign Exchange Control Act be repealed and replaced by the Foreign Exchange Act which will emphasise on management of our foreign reserves. As you know, of late, the reserves have been growing, while in the past we have had challenges with foreign reserves.
“Our reserves are growing every day, so what is important at the moment is to manage the reserves and not control them in order to assist in contributing to the growth of the country’s economy,” he said.
Malitoni said the new law will assist the sector in terms of reviewing fines and penalties given to those who deal in illegal transfer of foreign currency.
“The punishments will be enhanced and the aim is to deter would be offenders. Currently, the fines are very low and the offenders also look at the law before indulging in what they want to do.
“They know that, i f I breach this law, the maximum penalty or punishment I can get is this and they know how to maneuver with it. So, the new law will offer hefty punishments,” he said.
In 2016, President Peter Mutharika urged RBM to review the Exchange Control Act which, he described, as too old.
Mutharika said the review of the act would help in controlling illegal foreign exchange externalisation in the country.
He said illegal forex externalisation was draining the country’s foreign exchange reserves hence the need for RBM to tighten all the loopholes if the country was to develop.
“We need to secure what we already have but we cannot progress with an Exchange Control Act that is older than our democracy,” said Mutharika.