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Reference rate slashed further

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Lyness Nkunguula

The cost of borrowing is expected to continue easing as reference rate—a benchmark for other rates—has been reduced for the third time since the Reserve Bank of Malawi (RBM) announced a policy rate reduction with 150 basis points from 13.5 percent to 12 percent.

In separate statements, some commercial banks announced to have further slashed their reference rates from 12.1 percent to 12 percent.

In an interview, Bankers Association of Malawi Chief Executive Officer Lyness Nkungula said there was a big cut of the reference rate in November; therefore, banks were still adjusting.

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Nkungula added that the move would see borrowers paying lower interest rates, which would result in consumers having more disposable income in the coming months.

“Banks saw a reduction in lending interest rates following the November change. RBM has injected some liquidity into the market, which should help reduce funding costs for the market,” Nkungula said.

In a separate interview, Economics Association of Malawi President Lauryn Nyasulu was upbeat that the cost of borrowing would continue to go down in the months to come.

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“The cost that borrowers bear will be less than in the past. So, we should be slowly getting closer to the intended purpose where the intention of adjusting the policy rate, among others, was to stimulate the economy by ensuring that cost of capital goes down,” Nyasulu said.

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