Profit before foreign exchange revaluations for the Reserve Bank of Malawi (RBM) went down by K11.2 billion in 2021 to K51 billion from K62.2 billion in the preceding year.
In its Financial Report issued last week and signed by Governor Wilson Banda and Board Audit Committee Chairperson Maxwell Mkwezalamba, RBM says, consequently, dividends to the government have dropped to K20 billion from K30 billion in the preceding year.
The drop in profits has been attributed to volatility of the economic environment due to the Covid pandemic.
The central bank indicates that the Covid pandemic affected the domestic vendor-supply chain which put pressure on foreign exchange as imports grew by 5.9 percent in the last quarter of 2021 to $870.6 million from $739.65 million in December 2020.
The financial statement adds that the worsening merchandise trade balance also increased pressure on holdings of foreign exchange reserves and the exchange rate.
“The Covid pandemic affected commercial banks operations because lending to companies or individuals was viewed as riskier as economic activities were significantly affected by the pandemic. Therefore banks intensified investments in the securities market relative to disbursing loans during the year,” the statement reads.
Despite the subdued profit, the central bank directors indicate that the bank has adequate resources.
An audit and financial advisory firm, Deloitte, conducted the audit on behalf of the bank and, apart from looking at its performance, the audit firm also looked at fraud risk based on possible fraudulent activities at Export Development Fund (EDF), a subsidiary of RBM.
EDF established a market in 2017 but it was closed in 2020 due to sustained losses.
A forensic audit was instituted and established deficiencies in internal control, negligence as well as showing traits of fraud which have been taken up by law enforcement agencies, according to the report.
“Material potential losses due to fraud allegations are limited to CMM trade receivables and an investment at EDF only; material potential losses due to fraud allegations at EDF are not material to RBM.
“Management integrity risks identified at an EDF level do not give rise to risks of material misstatement at a group level and predecessor work on opening balances cannot be relied upon,” the statement reads.
Justin Mkweu is a fast growing reporter who currently works with Times Group on the business desk.
He is however flexible as he also writes about current affairs and national issues.