The Reserve Bank of Malawi (RBM) says the general slowdown in economic activity in the country amid the Covid-19 pandemic suppressed credit to the private sector in March.
In its Monthly Economic Review for March, the central bank said during the review month, private sector credit contracted by 0.6 percent or K3.3 billion to K547.6 billion, following another decline of K2.7 billion in the preceding month. The annual growth rate of private sector credit thus was recorded at 23.8 percent in March compared to 24.4 percent in February 2020.
Economic commentators say the suppressed credit to the private sector could be as a result of businesses taking a wait-and-see mode as the business environment has generally slowed down, with most industries closed and some operating on half their capacity.
In terms of economic sectors, RBM said the decline in stock of private sector credit was explained by credit contractions in electricity, gas and water, financial services and communications amounting to K10 billion, K5.4 billion and K3.3 billion, respectively.
But in contrast, credit to real estate, manufacturing, agriculture, forestry, fishing and hunting and wholesale and retail trade sectors expanded by K9.3 billion, K5.4 billion, K4 billion and K1.4 billion in the month.
Reads the report in part: “The distribution of the outstanding stock of private sector credit across the economic sectors remained generally unchanged.
“Wholesale and retail trade sector continued to be the largest credit holder at 24.3 percent of the outstanding stock of private sector credit, followed by the agriculture sector at 23.5 percent, manufacturing at 13.8 percent and community, social and personal services sector at 13.1 percent.”
Indigenous Business Association of Malawi (Ibam) president Mike Mlombwa, said in an interview most local businesses especially those that depend on imported goods as raw materials have stopped producing hence the decline in credit.
Malawi Confederation of Chambers of Commerce and Industry (MCCCI) in its April economic report also indicated that business performance is also subject to sereval risks that have emanated in view of Covid-19 including other risks such as the current political crisis and the uncertainty that it is bringing, global supply chain disruptions, inadequate electricity and corruption, among others.
Last month RBM in conjunction with the Bankers Association of Malawi (BAM) agreed a number of measures that are aimed at easing challenges on businesses due to Covid-19 effects. The measures among others include a three-month moratorium on interest and principal repayments for loans by borrowers on a case -by-case basis, activation of the emergency liquidity assistance facility and make it available to banks on a case by case basis.