Some of the country’s economists have hailed the 2.6 percent growth in the average savings rate, saying it will inspire people to save more.
The national savings rate is at 2.9 percent, which is below the recommended average of 12 percent.
According to the Reserve Bank of Malawi (RBM), the country’s average savings rate has risen to an average of 8.4 percent from an average of 5.8 percent recorded in December 2017, before the policy rate was reduced from 18 percent to 16 percent.
Economics Association of Malawi (Ecama) Executive Director, Maleka Thula while noting the deliberate policy by the banks to promote deposits, said the outturn will lead to an improved savings culture among Malawians.
“This outturn is a good stance taken by banks as it is going to promote a culture of savings as at 7.8 percent inflation rate, savers will realize a positive real interest rate with deposit rate at 8.4 percent.
“But the expectation was that the decline in commercial bank lending rates arising from a downward revision in policy rate should have been followed by a drop in savings rate. However, banks must have increased their savings or deposit rates to mobilize more deposits,” he said.
But Alliance Capital Limited said although individual savings are not high enough for investment, it is important that the economy gets reorganized to woo resources from all avenues to improve the country’s rate of savings.
Reserve Bank of Malawi (RBM) spokesperson Mbane Ngwira said that low rate of savings rate has been a result of the economy not performing well.
Economists argue that a higher savings rate a country registers naturally results in the rapid growth of gross domestic product (GDP.)
When household savings are deposited in the commercial banks, they contribute to private savings and become available in the national accounts.
Despite interest rate liberalization, savings rates have continued to tumble as follows; five percent of GDP in 1990, -3 percent in 1993, 10 percent in 1994, -4 percent in 1996 and -2 percent in 1999.Follow and Subscribe Nyasa TV :