The Reserve Bank of Malawi (RBM) has introduced a new regulation that requires institutions to submit travel documents for online air ticket purchases, in an effort to tighten oversight and promote transparency in foreign exchange usage.

Key requirements of the regulation

• Applicants must submit travel documents to their banks
• Upon return, applicants must submit a copy of stamped passports for verification
• Authorised dealer banks must submit periodic reports on online purchases

The regulation, which is specific to institutions with Foreign Currency Denominated Accounts, aims to address challenges faced by these institutions in purchasing air tickets for official travel.

Benefits of the regulation

1. The regulation addresses the challenge of institutions failing to purchase air tickets
2. It introduces a new level of accountability, particularly important in a context where forex reserves are strained
3. The regulation promotes transparency in foreign exchange usage

In an interview, Financial Market Dealers Association secretary general James Mbingwa said the regulation is positive because it addresses the challenge faced by institutions with Foreign Currency Denominated Accounts. “This new regulation addresses the challenge that was there where institutions were failing to purchase air tickets for their staff official travel,” he said. The regulation requires applicants to submit travel documents to their banks and upon return, they must submit a copy of stamped passports for verification.

Implementation and challenges

In a separate interview, Bankers Association of Malawi chief executive officer Lyness Nkungula said the new requirements by RBM reflect a deliberate effort to tighten oversight and promote transparency in foreign exchange usage. “By mandating proof of payment and confirmation of travel, the regulation seeks to align forex allocations with actual economic activity and curb misuse,” she said. However, Nkungula highlighted that the success of this regulation will rest on how efficiently the supporting systems are implemented, and that clear communication, streamlined processes, and collaboration between banks and travellers will be key to ensuring compliance without undue friction.

Support from financial market players

“This new regulation is effective oversight on foreign exchange dealings,” said Financial Market Dealers Association secretary general James Mbingwa. “The regulation addresses the challenge that was there where institutions were failing to purchase air tickets for their staff official travel.”

National Advocacy Platform chairperson Benedicto Kondowe has said the regulation reflects RBM’s determination to close forex leakages and ensure accountability in how foreign currency is used.

Conclusion

The RBM’s foreign exchange regulation is a positive step towards tightening oversight and promoting transparency in foreign exchange usage. While challenges may arise, the regulation has the potential to address challenges faced by institutions with Foreign Currency Denominated Accounts, and to curb misuse of foreign currency. With efficient implementation and collaboration between banks and travellers, the regulation can be successful in its goal of promoting accountability and transparency. It is essential to ensure that the supporting systems are in place to facilitate compliance without undue friction. Further monitoring and evaluation are required to ensure the regulation is effective. Ultimately, the success of this regulation will depend on the commitment of all stakeholders to ensure its implementation and compliance. It is crucial to address any challenges that may arise to ensure the regulation achieves its intended goals. With proper implementation, the regulation has the potential to promote accountability and transparency in foreign exchange usage.