- Written by Grace Phiri - The Nation
- Created on 14 August 2017
The Institute of Bankers (I0B) in Malawi says commercial banks have cashed in on the consistent slowdown in inflation and stability of the local currency in the first half of 2017.
I08 executive director Lyness Nkungula said this on Friday in an e-mailed response to a questionnaire on the banks’ performance during the first half of the year.
Said Nkungula: “A consistent slowdown in inflation and stability of the Malawi kwacha together with good harvest of almost all food crops and the resumption of budgetary support by some developing partners gives hope to our economy, so it was not a bad start at all though making business is the survival of the fittest.“
“It is the expectation of every Malawian that inflation hits a single digit as we go along to ease the burden on Malawians. With the commitment of the government, this could be possible taking into account the current trend of inflation, the lowest since March 2012.”
In the recent months, the local currency has been on a steady path with data provided by Reserve Bank of Malawi (RBM) showing the local unit has for the past six months been trading at MK734 the dollar.
The local unit, according to the RBM figures, has managed to hold on to the current position since December last year before it retained another steady MK730 to dollar in the months of November, October and September last year.
On the other hand, the country’s annual rate of inflation has been falling steadily for more than 10 months since June 2016 helped by declining food prices, a relatively stable kwacha and lower international fuel prices.
This gave impetus to the Reserve Bank of Malawi (RBM) to reduce further the policy rate from 22 percent to 18 percent, a development which has triggered a drop in bank interest rates from around 31 percent to around 27.5 percent.
This means corporates and individuals will now be borrowing at reduced rates, a development which could increase companies’ productions and create jobs.
Government has maintained that it expects the local currency to remain stable going forward, with a report from the Ministry of Finance, Economic Planning and Development indicating that the kwacha will remain steady anchored by foreign exchange earnings from tobacco and cash crops, such as tea and legumes.
Finance and economic expert Misheck Esau is on record as having said the country is not doing enough to stabilize the local currency, observing that there is over-dependent on donor and non-governmental organizations (NGOs) flows to bridge the balance of payments position.
Commenting on the banks’ upgrade to the core-banking system, Nkungula said upgrading core banking systems is an urgent and necessary need for banks.
“The core system is the centre of all banking operations. Not only have real-time transactions placed pressure on banks, but also old systems may be more complex and inflexible and thus more difficult to manage. This hinders the growth of banks and retards efficiency. Upgrading core banking systems is beneficial, as it integrates all of the functions of the bank, ” she said.