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Banks liquidity level picking

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Lyness Nkungula

Liquidity level in commercial banks started picking up in October, a situation which forced them to look up to the lender of last resort, Reserve Bank of Malawi (RBM).

In September, for instance, liquidity level trends were between negative K70 billion and negative K85 billion, a development which threatened interest rates stability.

But, according to figures sourced from the RBM as reported in investment management and advisory firm Nico Asset Managers in its Weekly Market brief for the week ending October 8 2021, liquidity levels increased to a daily average of K25.46 billion.

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Consequently, according to the brief, the volume on interbank overnight borrowing decreased to a daily average of K13.60 billion from K15.30 billion in the previous week while access to the Lombard facility during the week in review averaged K83.39 billion.

The positive performance is in tandem with what the Financial Market Dealers Association (Fimda) projected recently.

Fimda President Mclewen Sikwese said treasury securities maturities would help improve the situation further.

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“Anchoring the market liquidity will also be the healthy Treasury securities maturities between October and the end of the year, with K158 billion injection of liquidity from maturing Treasury bills and notes and a relatively smaller withdrawal through the repos,” he said.

Bankers Association of Malawi Chief Executive Officer Lyness Nkungula said in a separate interview that the improvement has come about due to the rise in liquidity inflows into the system compared to outflows.

Nkungula said the inflows were in the form of Treasury bill and Treasury note maturities.

“The outflows mainly came from repayment of reverse repos. The liquidity will likely get tighter in this last quarter up to December,” she said.

Tight liquidity levels in commercial banks result in increased interest rates as consumers scramble for loans which are in short supply while demand is high.

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