Central Bank not worried about
use of Euro in retail outlets
With Malta on its way to becoming an EU member in May 2004, it is likely
that more and more tourists will expect to be able to use the Euro when
Since the introduction of the single currency the Maltese business community
took to the idea of accepting the new currency instead of Maltese Liri.
Accepting foreign currency has long been the practice in Malta with
most shops willing to accept either US dollars or pound Sterling usually
at unfavourable exchange rates for purchasers.
The Euro has quickly become a favourite and indeed some travellers are
not aware that the currency is not legal tender.
A spokesperson from the Central Bank of Malta told The Malta Financial
and Business Times: "The fact that Malta is on its way to becoming
a member of the EU implies that Malta has also made a commitment to
participate in EMU and, of course, eventually adopt the euro as its
"Malta has already aligned itself with some aspects of the EU Acquis
in this respect as for example with the amendments to the Central Bank
of Malta Act made in 2002.
"The amendments, for example, strengthened the Central Bank's independence
and prohibited the financing of government deficits by the Bank. There
are, of course, other important aspects that have to be taken into account
before Malta can adopt the euro, such as of ensuring that the Maltese
economy has achieved real convergence with that of the euro area and,
of course, participation in ERM11. What has changed vis a vis the euro
is that we are now certain that Malta will eventually have to adopt
the euro and, as such, we can start planning for it."
Asked whether the Central Bank would encourage use of the Euro, the
spokesperson said: "I don't think that it is a case for 'encouraging
further use of the euro,' as the Maltese lira is still the only currency
with legal tender status in Malta. The lira is not pegged directly to
the euro and although the weighting of the euro in the Maltese lira
exchange rate basket is as much as 70 per cent, the Maltese lira exchange
rate still varies against the euro on a day to day basis."
Nevertheless, the use of the Euro is expected to increase and asked
what would the reaction of the Central Bank be should this happen, the
spokesperson said: "We are well aware that retail outlets accept
the euro for purchases.
The Central Bank in fact facilitated this when it permitted the holding
of up to Lm 20,000 in foreign currency accounts for the purpose of depositing
currency acquired through trading.
"Retail businesses have always accepted foreign currency in exchange
for purchases made by tourists and the fact that outlets now accept
the euro more freely is certainly because now almost all foreign currency
transactions take place in euro.
"The fact that volume of transactions taking place in euro in the
Maltese Islands has been growing is not a source of concern. It is a
natural consequence of the euro having been adopted as the single currency
of 12 European countries."