The cost of borrowing in Malawi is the highest in the Southern African Development Community (Sadc), a research paper by the National Construction Industry Council (NCIC) shows.
The NCIC observation has been corroborated by Nation Online research which has found out that comparatively, as of December 2012, Malawi’s base lending rate, now at 25 percent, was the highest within the 14-member Sadc trade bloc.
An overview of all central bank benchmark rates is also published by the central bank rates website, www.cbrates.com.
According to an NCIC paper, ‘Reducing construction costs through development of local capacity’ authored by NCIC technical director Gerald Khonje, prevailing high interest rates in Malawi is among many other factors that are negatively affecting the efficient operation and growth of the construction industry in the country.
Khonje observes that the high interest rates and unfavourable monetary policies in Malawi, among others, are, in turn, contributing towards the rising costs of construction in the country.
The Reserve Bank of Malawi (RBM) raised the benchmark rate from 19 to 25 percent on December 3 last year in an attempt to stabilise the kwacha and contain high inflation rate currently at 34.6 percent as of December 2012.
On the other hand, commercial banks charged as high as 40 percent as of December 2012.
But the hike came at a time when most businesses were already struggling in a hostile economic environment unleashed by the 49 percent devaluation of the kwacha last May.
According to Internet research, Zambia’s base lending rate stands at nine percent while Tanzania and Mozambique lending rates stood at 12.7 percent and 9.5 percent as at December 31 last year respectively.
Other benchmark rates for Sadc member States include that of war-torn Democratic Republic of Congo (DRC) at six percent, Namibia (5.5 percent), Angola (10.25 percent) and South Africa (five percent), according to the Internet search.
Malawi Confederation of Chambers of Commerce and Industry (MCCCI) chief executive officer Chancellor Kaferapanjira told The Nation in a recent interview that the increase in the bank rate in the country translates into serious challenges in servicing both outstanding loans and overdrafts by the business community.
Finance Minister Ken Lipenga said in a published statement summarising achievements to date under the government’s Economic Recovery Plan (ERP) that the subsequent increases in interest rates was a necessary complementary policy reform aimed at mitigating pressure on the kwacha exchange rate.