The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) has expressed dismay at the Reserve Bank of Malawi’s (RBM) hike in policy rate, or bank rate, saying the business community will be choked.
The Monetary Policy Committee (MPC) of the central bank last Wednesday raised the benchmark lending rate by two percentage points from 25 percent to 27 percent due to “persistently high inflation, depreciating exchange rate, as well as uncertainties on food prices and wage demands”.
Said Newton Kambala, MCCCI president, on Tuesday: “You know Malawi is already not competitive when it comes to our products prices on the international market.
“One of the reasons is the high cost of finance. For RBM to start doing that I think they are being insensitive considering that this is actually the time they needed to help with cheaper working finance for the private sector to assist in turning this economy around.”
He said when the commercial bank reduced the rates, some few months ago, MCCCI knew it would not be sustainable, adding what is happening now is not surprising.
“I would like to urge the private sector to brace for hard times to come and keep working hard to keep their businesses afloat,” he said.
Already, two of the Malawi Stock Exchange (MSE)-listed banks, National Bank of Malawi (NBM) and Standard Bank yesterday announced a hike in their base lending rates.
For instance, NBM hiked its rate from 32 percent to 34 percent while Standard Bank raised it from 32 percent to 35 percent effective today following RBM’s decision to raise the bank rate—the rate at which commercial banks borrow from the central bank.
Ironically, NBM general manager Mac Fussy Kawawa complained in an earlier interview with The Nation that its business, which mostly revolves around lending, is suffering due to high interest rates which he said is subduing lending by its customers.
He said: “We would like to see more borrowing from our customers to improve our returns. However, at the current rates which are high, the level of borrowing is low.”
Small and Medium Enterprises Association (Smea) president James Chiutsi has also reacted to the raise in interest rates, saying it wo=uld only worsen the situation.
“We fail to appreciate that this is a necessary evil as same past actions have not made the situation any better. However, SMEs are resilient and will prevail [and] this only serves to encourage us to become innovative in sourcing financing, for example, by encouraging joint ventures and partnerships among other initiatives.”
The move by the commercial banks to raise base lending rates, will likely push the cost of borrowing. n