Thursday, October 4, 2012

Malawi holds interest rate steady, warns of growing risks

    The central bank of Malawi held its benchmark Bank rate unchanged at 21.00 percent against a backdrop of rising inflation, weak growth prospects and growing economic risks.
    The Reserve Bank of Malawi, which has already raised interest rates twice this year for a total increase of 800 basis points, said economic growth was estimated to slow to a 1.6 percent rate this year and then rebound in 2013, helped by improvements the availability of foreign exchange and a recovery in the agricultural sector.
    "According to financial stability assessments, macroeconomic risks have increased following the lower growth prospects for 2012. The risks have been reinforced by higher inflation expectations," the Reserve Bank said in a statement following a meeting of its Monetary Policy Committee on Oct. 3.
    Inflation rose to 25.5 percent in August from 21.7 percent in July, the bank said, due to higher food and non-food costs.
    It said that high lending rates, averaging 31.4 percent, had heightened credit risks as some portfolios ran the risk of being non-performing. The high rates on the money market was also leading to low trading on the stock exchange and monetary and financial conditions remain tight.


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