Money supply growth slowed in March this year, signalling what economists have rated as the result of a deliberate shift by authorities to tighten liquidity conditions.
Latest figures from the Reserve Bank of Malawi (RBM) show that in March, broad money supply growth slowed to 37.5 percent from 39.3 percent a month earlier. But it remained above the 33.9 percent recorded at the same time last year.
The central bank attributes the slowdown to lower growth in term deposits and foreign currency deposits, while overall monetary operations remained contractionary during the month.
On a month-on-month basis, broad money supply declined by K48.2 billion, or 0.6 percent, to K7.4 trillion in March.
Term deposits rose by K915.6 billion in the month under review, down from K954.2 billion in February, while foreign currency deposits increased by K155.2 billion to K208.4 billion.
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Comme n t i n g , economist Marvin Banda said the slowdown reflects growing recognition by authorities that continued expansion of money supply would worsen inflation, deepen forex shortages and destabilise the exchange rate.
“But for ordinary Malawians, prices are not falling. They are simply rising at a slower pace. The government has essentially reached the limits of reckless liquidity expansion,” he said.
Another economist Velli Nyirongo said the situation point to efforts by RBM and the government to reduce excess liquidity in circulation amid persistent inflationary and foreign exchange pressures.
Meanwhile, according to the RBM report, operations resulted in a net withdrawal of K161 billion from the banking system during the month under review.
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It says while government operations alone withdrew K140.1 billion from the market, open market operations accounted for another K18.3 billion withdrawal.
Reserve money also declined to K2.25 trillion in March from K2.41 trillion in February, reflecting tighter liquidity conditions in the banking sector.
RBM further said its net claims on government dropped by K52.6 billion, largely due to reduced borrowing through Ways and Means advances and the accumulation of government deposits at the central bank.
Treasury spokesperson Williams Banda said the moderation in money supply growth reflects the government’s ongoing fiscal consolidation efforts aimed at restoring macroeconomic stability containing inflationary pressures.
“The government remains committed to disciplined expediture management and strengthening domestic revenue mobilisation,” he said.
