By Benadetta Chiwanda Mia & Chimwemwe Mangazi
Banks, the private sector and economists have reacted to last week’s policy rate slash to 24 percent from 26 percent, as the Reserve Bank of Malawi (RBM) points to further cuts in the near future.
On Thursday, the central bank’s Monetary Policy Committee announced that it had reduced the benchmark rate following an ease in headline inflation to 24.9 percent.
Bankers Association of Malawi (Bam), the umbrella body of the country’s eight banks, said the reduced rate is expected to ease borrowing costs, potentially increasing access to credit for individuals and businesses.
Bam Chief Executive Officer Lyness Nkungula said banks were to review their lending rates in response to the policy rate cut, which could make loans affordable.
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“We are committed to supporting Malawi’s economic growth by providing competitive financial solutions,” Nkungula said.
Already, in an earlier communication, Centenary Bank Limited announced a lending rates adjustment from 24.70 percent to 23.70 percent, before reducing it further to 22.40 percent effective March 9.
Standard Bank plc and FDH Bank plc also announced a downward review of their reference rates from 24.70 percent to 23.70 percent effective March 5.
They were responding to market trends, which already were pointing to further ease in cost of borrowing, with Treasury bill yields seen falling since the start of the year.
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Malawi Confederation of Chambers of Commerce and Industry (MCCCI) rated the trends as ideal for business growth.
But in a statement, MCCCI cautioned that the policy adjustment alone would not resolve the structural challenges businesses were facing.
“Limited access to foreign exchange has disrupted production cycles, increased operating costs and constrained the ability of firms to meet both domestic and export demand,” MCCCI says.
Meanwhile, RBM Governor George Partridge has hinted at the possibility of further policy rate reductions in the near future if the government maintains fiscal discipline and restrains domestic borrowing.
In an interview on Saturday, Partridge outlined conditions that could lead to further rate cuts, linking future monetary policy decisions to sustained expenditure control.
“In the next few days, we are expecting a reaction from commercial banks,” Partridge said.
But economist Marvin Banda was sceptical over sustainability of low headline inflation in the short to medium terms.
