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Banks maintain reference rate

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Thokozani Saulosi

The cost of borrowing is expected to remain stable, at least in the nearest and foreseeable future, as commercial banks in the country have maintained the reference rate—a benchmark for other rates—at 12.20 percent for the month of September.

In separate statements, almost all commercial banks announced to have maintained their rates.

In April, regulator, the Reserve Bank of Malawi (RBM), also maintained its policy rate—the rate at which commercial banks borrow from the central bank as lender of last resort— at 12 percent.

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In a statement at the end of the Monitory Policy Committee meeting, RBM Governor Wilson Banda said the resolution was made in a bid to help businesses recover from the economic hardships brought about by the Covid pandemic.

Bankers Association of Malawi (Bam), an umbrella body for commercial banks in the country, attributed the position to an increase in average overnight interbank rate of 11.97 percent from 11.96 percent.

According to Bam Chief Executive Officer Lyness Nkungula, this was countered by the decrease in all type t-bill yield from 12.85 percent to 12.76 percent.

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Speaking in an interview on Monday, an economist from the Malawi University of Business and Applied Sciences Betchani Tchereni said this shows that banks are responding to RBM’s position.

He added that this also means that the cost of borrowing has been stable in the past months.

“This indicates that the economy has not been as turbulent, which does not necessarily mean that it has been good but there has been some level of stability, which is good,” he said.

Alliance Stoke Brokers Operations Manager Thokozani Saulosi said maintaining the rate is accruing to several factors including inflation trends.

He said there was, however, still scepticism on the outlook as the pandemic was still wreaking havoc in most sectors of the economy.

“Considering current economic conditions, it is still ideal to boost economic activity through private sector borrowing. The lower reference rate is a catalyst to the recovery of the economy,” he said.

Recent reports show that commercial banks in the country have seen a surge in demand for credit from the private sector.

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