The Reserve Bank of Malawi (RBM) has said it expects the country’s financial system to remain stable in the short to medium terms.
The central bank has premised its assumption on a favourable domestic growth outlook this year.
In its December 2019 Financial Stability Report which focuses on the six month-period to December 2019, RBM says it hopes that the financial sector would also remain resilient to any possible shocks.
This comes as the country’s Gross Domestic Product growth is expected to pick up 5.1 percent in 2020.
The projection assumes a recovery in agricultural production for the 2019/20 season, as well as favourable macroeconomic conditions.
In 2019 growth was estimated at 5.0 percent from a growth of 4.1 percent in 2018.
In the report, RBM says during the second half of 2019, the Malawi financial system remained stable and resilient to both domestic and external shocks.
Using December 2019 data, stress testing results showed that the banking system for instance was resilient to credit, interest rates and income shocks.
“The banking sector remained sound and stable as was well capitalised at all levels with sufficient liquid positions, growth in earnings, though with a slightly weakened asset quality,” reads part of the report.
Total assets for the sector increased by 8.4 percent to K1,890.2 billion in December 2019.
The banking sector remained liquid as evidenced by an industry liquidity ratio of 58.9 percent as at December 2019, which was above the minimum prudential liquidity requirement of 25.0 percent.
On the other side, the general insurance sector performance was reportedly unsatisfactory despite posting profits as most insurers registered inadequate liquidity and capital, with high levels of overdue insurance receivables.
The life insurance sector was fairly sound as it was well capitalised with satisfactory earnings performance.