Reserve Bank of Malawi defends K35 billion profit
The Reserve Bank of Malawi (RBM) Monday defended the K35 billion profit posted in 2020 at the peak of Covid pandemic when many businesses faltered in the country.
In its financial statement posted on RBM website, the central bank says it posted the profit despite the year 2020 being characterised by a tough economic environment due to the Covid pandemic.
In an emailed response to a Times questionnaire on Monday, RBM spokesperson Onelie Nkuna justified the huge profit, saying although the overall objective of a central bank is not to make a profit, but to ensure price and financial stability, in the process of executing its mandate, a central bank does make profits and at times losses.
“Indeed in 2020, the RBM posted profits and this was mainly as a result of three factors; firstly, RBM made a gain on the sale of some securities. Secondly, this was due to the debt relief granted by the IMF on the facilities due in 2020 (this was under the Catastrophe Containment and Relief Trust- CCRT) programme.
“Thirdly, indeed as you have rightly put the year 2020 was characterised by the Covid pandemic, this also negatively impacted the planned activities of the bank, consequently, there were savings realised from the reduced activities in the year,” Nkuna said.
She added that the profits will be remitted to the government as dividends.
RBM’s 2020 profit is K22 billion shy of the K57 billion profits the bank posted in 2019.
RBM, which holds liabilities for the state is by law required to place 10 percent of government liabilities into the General Reserve Fund as guided by Section 64 Sub-Section 2 of the amended RBM Act of 2019.
Besides, Section 64 sub- Section 3 of the same legislation entails that the bank’s profit shall be credited to the General Reserve Fund until it reaches 10 percent of the amount of the bank’s monetary liabilities and thereafter, any profit shall be distributed to the government in form of dividends.
In the event of a loss incurred by the bank, such a loss is deducted from the same General Reserve Fund.
Last year, RBM engaged external auditors to conduct a forensic audit of its operations and, according to Nkuna, the results of the audit are yet to be released.
“The Forensic Audit report is not yet out. The delays have been due to the second wave of the Covid pandemic which ravaged this country in the past months, and negatively impacted audit operations,” Nkuna said.
Last week, the Consumers Association of Malawi (Cama), noted that the country’s banks were posting supernormal profits at the time when all sectors of the economy have been chocked by Covid pandemic.
Cama Executive Director, John Kapito, said it very hard to imagine how banks could register such huge profit jumps in the tough environment of the Covid.
“Out of all these experiences it is sad to see only one sector of the private sector, the banks, posting such huge profits from a market where all the players such as industries and consumers are almost closing businesses and they don’t have any disposable incomes. The banks took advantage of Covid to use the regrettable situation to punish their customers through unfair higher interests rates and charges,” Kapito said.