Private sector umbrella body, the Malawi Confederation of Chambers of Commerce and Industry (MCCCI), has called on the Reserve Bank of Malawi (RBM) to focus on framing policies that would see the cost of borrowing lowered.
While welcoming the recent decision by the central bank’s Monetary Policy Committee to maintain the policy rate at 26 percent, MCCCI President Wisely Phiri lamented an environment where the cost of capital remains high.
He said the decision was expected as all the macroeconomic indicators were pointing to it.
“We hope and encourage the government to work on coming up with better policies that will help lessen the burden on the private sector, which is being hammered with high cost of capital.
“The bank rate, now at over 30 percent, which is the highest rate in our region, is choking the business, hence making Malawians poorer than before,” Phiri said.
In a statement last week, RBM indicated that, among other things, there was high money supply growth, underperformance of the export sector and higher global oil prices as major risks to the inflation outlook, stressing that headline inflation is, therefore, projected to average 30 percent in 2024.
“The Monetary Policy Committee (MPC) noted that inflation is on a downward trend but remains high. Therefore, the committee resolved to maintain the policy rate at 26 percent. The committee also decided to maintain the LRR ratio for foreign currency deposits at 3.75 percent and the Lombard rate at 20 basis points above the policy rate.
“However, the MPC resolved to increase the LRR ratio for domestic currency deposits by 100 basis points from 7.75 percent to 8.75 percent to address the rapid expansion in money supply,” the statement reads.
Our analysis shows that in recent months, decisions by central banks in neighbouring countries were mixed despite variations in mandates and sizes of economies.
For example, in January, Mozambique’s central bank reduced its benchmark lending rate to an almost four-year low to set it at 15.75 percent.
The Reserve Bank of Zimbabwe also recalibrated the bank policy rate from 130 percent to 20 percent.
However, last month, the Bank of Tanzania increased its policy rate from 5.5 percent to 6 percent in response to changes in inflation, which remained steady at 3 percent in the first quarter. In Zambia, the central bank raised the policy rate by 150 basis points to 12.5 percent, citing a further deterioration in the inflation outlook.
