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Lending rates hit 38-year low

Malawi’s lending rates by commercial banks have sunk to a 38- year low, figures from the Reserve Bank of Malawi (RBM) indicate.

Following introduction of reference rate, cost of borrowing stands at 13.4 percent as at September 1 before risk is factored in.

The reference rate is a new method of calculating the base rate and is used as the base rate.

According to RBM data, from 1981 to date, Malawi had the highest lending rates as of April 2001, when the base lending rate hit 65 percent.

The figures further show that the softest lending rate was 13.9 recently recorded in June 2019.

The figures further show that lending rates have been steadily declining from October 2016 when they were seen at 37.1 percent.

RBM Director of Communication, Mbane Ngwira, said the drop in interest rates has been a result of prudent policy implementation.

“This is the macroeconomic stability that we have been working for. Inflation rates are in single digit for the past three years from as high as 38 percent.

“Foreign exchange reserves have remained at more than three months of imports,” Ngwira said.

Speaking on the sidelines of an inaugural Eminest Speakers series organised by the Mwapata Institute, Michigan State University (MSU), National Planning Commission (NPC) and Lilongwe University of Agriculture and Natural Resources (Luanar), recently, RBM Governor, Dalitso Kabambe, said Malawi was at a juncture where the economy had stabilised.

“What should be the various actions that those that are in the various sectors of the economy should take to see the economy growing. In the mining sector, in the agriculture sector, in the processing sector, in tourism, transport as well as the other sectors, what should be our roles to ensure that we are, taking advantage of the sound microeconomic environment we are in.

“People do not eat stable macro-economic environment. People eat the outcome of a growing economy. We need to raise GDP, grow it; that’s what creates wealth, that’s what creates jobs,” Kabambe said.

Finance Minister Joseph Mwanamvekha said when he opened the NBM Development Bank in Lilongwe recently that the government would like to see many Malawians taking advantage of the falling cost of borrowing to strengthen their businesses and create jobs for Malawian youths.

RBM targets an inflation rate of five percent by 2021, which would see the policy rate coming down to 11 percent.

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