Experts see policy rate above 20%

Mcfussy Kawawa

Economic experts have predicted an imminent rise in the policy rate by the Reserve Bank of Malawi (RBM) owing to rising inflation and changes in other macroeconomic parameters in recent weeks.

The National Statistical Office recorded inflation at 19.1 percent in May 2022, the highest since November 2016.

In the same month, RBM raised the policy rate to 14 percent from 12 percent to ease pressures that threatened the stability of the inflation rate.


In an interview, Research and Consultancy Director Milward Tobias said, currently, it does not make economic sense to have the policy rate at 14 percent while inflation rate is hitting the skies and expected to continue rising.

“The policy rate is likely to be moved upwards because now, with inflation rate at 19.1 percent, the policy rate is lower than inflation rate, which is an economic anomaly because, at 19.1 percent, inflation rate is getting closer to the lending rate,” Tobias said.

Malawi University of Business and Applied Sciences-based economist Betchani Tchereni concurred with Tobias, saying an upward adjustment will be justifiable.


“I know the Monetary Policy Committee (MPC) of the RBM will be meeting shortly and it is my expectation that it will increase the policy rate to as high as 20 percent because it has to be more than the inflation rate,” Tchereni said.

However, players in the private sector have indicated that increasing interest rates are a burden to the flow of business.

In a recent interview, president of the Bankers Association of Malawi, who is also Chief Executive Officer for National Bank of Malawi, Macfussy Kawawa said when interest rates rise banks lose business.

“This leads to reduced appetite to lend to customers among banks’,” Kawawa said.

Recently, president of the Malawi Confederation of Chambers of Commerce and Industry Lekani Katundula told Times Business that, in the medium to long term, the economy should be able to adjust.

“The future can be good or bad depending on how economic actors such as businesses and individuals react. It must be noted that the government’s role should be to put in place necessary enablers for entrepreneurs and businesses to translate opportunities into reality,” Katundula said.

Inflation is expected to continue rising as fuel prices were adjusted upwards by an average 34 percent on Wednesday night.

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