Private sector credit grew by 21.3 percent in 2019 compared to 11.5 percent in 2018 Reserve Bank of Malawi (RBM) has said.
The central bank attributes the rise to reduction in interest rates in the year.
RBM Governor, Dalitso Kabambe made the observation at the end of the first 2020 Monetary Policy Committee (MPC) meeting in Blantyre where he also announced the committee’s resolution to maintain the policy rate—the country’s indicative cost of borrowing—at 13.5 percent.
The development excited economic experts who believe the stance will go a long way in stabilising the economy in 2020.
The RBM has maintained the policy rate at 13.5 percent since May 2019.
This, according to Kabambe, has led to stability in cost of borrowing in the country as commercial banks have for a great part of the year also maintained their lending rates.
Kabambe said there was a surge in borrowers’ base during the year under review.
“Apart from the tradition borrowers, notable expansions were observed in energy and mining sectors,” Kabambe said in the first 2020 MPC statement.
There was also a pick-up in the economy in 2019, coupled with declining interest rates which saw continued growth of credit to private sector.
This, the central bank said, would spur productivity and help in creation of job opportunities.
Private sector credit is re-establishing a trend enjoyed in 1964 and 1983, and between 2004 and 2011.
Kabambe said the country will need to stay this course for some years to see businesses expanding, jobs created, more output realised and more wealth created which will reduce poverty.