Economic climate forces Standard Bank to cut rates

Standard Bank (Malawi) Limited on Thursday followed the path taken by National Bank of Malawi (NBM) to reduce its interest rates, but has gone a little deeper to peg its base lending rate at 35 percent from around 40 percent.

On Wednesday, NBM cut its base lending rate to 36 percent from 40 percent.

Standard Bank head of marketing Chimwemwe Matonga justified the interest rates cut yesterday, attributing it to the “general macro-economic environment” particularly characterised the trending downwards of Treasury Bills (T-bills) rates on all the tenors.

“We are also hoping that the tobacco season will perform well this year and that the kwacha will appreciate,” he said.

Economists have said it is highly likely that other banks will follow suit to reduce their interest rates.

Beginning January this year, the country’s commercial banks raised their interest rates to above 40 percent, a move analysts said was a reaction of the Lombard facility by the Reserve Bank of Malawi (RBM) pegged at 27 percent, two percentage points above the benchmark rate to assist authorised dealer banks to manage their liquidity squeeze.

Over the past few weeks, T-bills rates have been easing on all the three tenors with Reserve Bank of Malawi (RBM) figures last week showing T-bills rates decreased with the 91 days tenor dropping to 17.9 percent from 20.4 percent, the 182 days rate eased to 19.5 percent from 21 percent, while the 364 days rate closed the week at 22.1 percent from 23.8 percent.

Liquidity levels have also improved, increasing from an average of K17.8 billion a day last week from a daily average of K16.1 billion the week before, according to the investment advisory firm.

Chancellor College economics professor Ben Kaluwa on Tuesday said other banks will likely cut their base lending rates.

“With the improvement in liquidity and the continued decreasing in T-bills rates, the banks have no choice but to cut the lending rate. Interest rates in Malawi are prohibitive,” he said.

Nico Asset Managers expects short term interest rates to continue decreasing as the central bank continues with its tight monetary policy through mopping up of excess liquidity to foster price stability.