RBM releases K12 billion, maintains policy rate at 13.5 % to bolster Malawi economy
The Reserve Bank of Malawi (RBM) has released K12 billion into the country’s commercial banks to enable the financial institutions support sectors hit by the coronavirus outbreak and announced a raft of other measures to bolster Malawi’s economy.
RBM Governor, Dalitso Kabambe, announced this in a statement dated April 1 2020 after a two-day meeting of the Monetary Policy Committee (MPC).
According to Kabambe ,the committee resolved to cut the Liquidity Reserve Requirement (LRR) on domestic deposits by 125 basis points to 3.75 percent from 5.0 percent.
“This reduction will immediately release primary liquidity of about K12 billion uniformly across the banking system in proportion to liabilities of the banks,” he said.
He added that the committee also resolved to reduce the Lombard Rate ( interest rate charged by central banks when providing short-term loans to commercial banks) by 50 percent to 0.2 percentage points above the Policy Rate to enable commercial banks to pass on the benefits to its borrowers.
“These decisions were deemed necessary to ease banking system liquidity constraints and incentivise commercial banks to adequately support the sectors that are hit by the Covid-19 pandemic,” he said.
Malawi registered its first Covid-19 case on Tuesday in Lilongwe. President Peter Mutharika has advised Malawians to continue protecting themselves from the virus and not to panic during this time.
He, however, added that the MPC decided to maintain the Policy Rate at 13.5 percent to mitigate against potential upward risks from the pandemic while monitoring developments as they evolve and act as and when necessary.
According to RBM, the recent strong agricultural harvests have boosted growth, but the growth path for the remainder of the year will depend on the impact of Cvoid-19 on the rest of the sectors following the disruption of global and regional economic links.
“This notwithstanding, economic growth may rise further to 6-7 percent in the medium term, backed by infrastructure that is more resilient to shocks from climate change, improved access to finance, crop diversification, and an improved business climate.”
The central bank said inflation at the end of year 2020 is projected at 9.3 percent from 11.5 percent at the end of 2019. Food inflation is projected to continue declining in the near term, owing to improved maize harvest.
The continued exchange rate stability together with the decline in global oil prices will assist to contain non-food inflation.
However, it says the uncertainties surrounding the evolution of the Covid-19 pandemic is the key upward risk.
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I did not understand anything. The terminology is too big.
Our banks only lend to those who have high value assets they do not lend to Start-ups like me despite I have big potential but low asset base. we the small entities are the ones hit hard by Covid19 which seems to have come at a time when hrdc has just slowed down. Chonde bwana kabambe tiganizileni by issuing a directive to commercial banks to prioritise start-ups.
Only if he read this comment…it will pounce really hard on us startups
Good decision RBM! My respect to you. Malawi has indeed a Reserve Bank that is in touch with national economic issues and is really on the driving seat. Ah, where was this wonderful team when Malawi was wallowing in high interest rates and inflation? Akadakhala ena aja mukadamva akuti takweza Lombard rate to tame inflation – kupanda nzeru sizinthu.
It’s just a virus.
“backed by infranstructure that is more resilient to shocks from climate change” which are these that are only seen on paper? What are the modalities put in place for the utilisation of this Mk12billion if not meant to cushion the business of the same people that are making Malawian suffer in poverty while they are enriching themseves firthily.
Agree. The K12 billion will only be used to cushion themselves, the greedy rich ones, from the shocks of coronavirus. NO poor Malawi will have a sniff on that K12 billion. This is how this mafia government operates.
Mr. Shatta
You better shutup