LILONGWE-(MaraviPost)-Malawians will continue to brace for more hard times when borrowing money in commercial banks as the Reserve Bank of Malawi (RBM) has just raised the benchmark policy rate by 200 basis points to 26 percent.
The policy rate hike which is the key driver of interest rates on loans, will in turn compel commercial banks to raise their interest rates from the prevailing 23.6 percent, raising the price of loans even further.
In a statement of the Second Monetary Policy Committee (MPC) of 2023 issued on February 1, 2024, RBM Governor Wilson Banda said the committee observed that the high inflation environment is not conducive for growth.
Banda therefore argues that the bank resolved that a monetary policy response is required to contain inflationary pressures and restore price stability.
“The Monetary Policy Committee (MPC) met on 31st January and 1st February 2024. Based on an assessment of the macroeconomic situation and outlook, the MPC decided to increase the Policy rate by 200 basis points to 26.0 percent.
“Meanwhile, the Committee resolved to maintain the Lombard rate at 20 basis points above the Policy rate and the Liquidity Reserve Requirement (LRR) ratio at 7.75 percent for domestic currency deposits and 3.75 percent for foreign currency deposits,” reads in part MPC statement.
The bank adds, “In arriving at this decision, the MPC observed that inflationary pressures have intensified, such that inflation is projected to persist before it starts to decline. The decision is, therefore, intended to counter inflationary pressures and restore price stability”.
The development comes barely three months after Malawi Kwacha was devalued by 44% making it hard for locals to meet the cost of living.
President Lazarus Chakwera Tonse’s administration has failed to manage Malawi’s economy characterized by high cost of living, inflation, and scarcity of food including maize, sugar over three years in power.
