Commercial banks raise base lending rate to 25%
Commercial banks have raised reference rate or the base lending rate by 10 basis points to 25 percent following Reserve Bank of Malawi’s (RBM) hiking of the Liquidity Reserve Requirement (LRR) ratio on domestic deposits.
The banks have hiked their reference rate three days after RBM Monetary Policy Committee on Friday hiked the LRR ratio for domestic currency deposits to 8.75 percent to address “the rapid expansion in money supply”.
Commercial banks have in separate statements notified their customers of the change in reference rate from Monday May 6.
Reads a statement from Standard Bank plc: “We wish to inform you that the reference rate, which is also the base lending rate, for May is 25 percent from 24.90 percent in 2024.”
Speaking in an interview, Malawi Confederation of Chambers of Commerce and Industry manufacturing committee chairperson Godwin Ng’oma said the industry is yet to calculate the impact of the adjustment, adding that any lending rate rise is negative to the real sector.
He said: “We think the response from banks has come quite early just after two to three days, but the industry was expecting this because whichever instrument the RBM chooses to use between the policy rate and LRR ratio, there should be an impact.”
But Consumers Association of Malawi executive director John Kapito said the raise is confusing coming at a time inflation rate is decelerating.
RBM has forecast 2024 annual inflation at 30 percent and upside risks to the inflation outlook.
The Reserve Bank of Malawi (RBM) and Treasury say they are yet to decide on an International Monetary Fund (IMF) recommendation to merge the Export Development Fund (EDF) and Malawi Agricultural Industrial Investment Corporation (Maiic).
They say the decision will not be done in a hurry because it is just a recommendation and not a condition.
The position follows a recommendation by the IMF in November last year when it approved Malawi’s four-year $175 million (about K306 billion) Extended Credit Facility (ECF) programme that EDF only drains foreign exchange while its role is similar to that of Maiic.
But in an interview on Thursday, RBM spokesperson Mark Lungu said not much progress has been made thus far because there are many areas that have to be looked into by stakeholders.
He said: “Firstly, the owners need to reflect whether or not the EDF has achieved its objectives which necessitated its creation.
“The IMF did not give a timeline for the merger so we are treating the issue as something that can be done not in a hurry. Again, the fund just gave its recommendation, so we treat it as a recommendation and not a condition.”
Ministry of Finance and Economic Affairs spokesperson Williams Banda said government will follow procedures to move forward, adding that the issue involves various stakeholders.
“Government will do the review of the legal instruments and follow due processes to move forward. The instructions were incorporated by Acts of Parliament,” he said.
