Reserve Bank of Malawi (RBM) has said the policy rate — the rate at which commercial banks borrow from the central bank as lender of last resort—will not change, particularly in the first quarter of the year on account of inflationary pressure.
In a bid to mitigate and improve the worsening macroeconomic indicators, RBM last year introduced a number of monetary policy measures, including a review of the liquidity reserve requirement (LRR) and raised the bank rate by 2.5 percentage points to the current 25 percent.
In a statement released on Thursday and signed by RBM Governor Charles Chuka, the bank said its projections are based on the sharp exchange rate depreciation from July to December 2015.
Reads in part the statement: “Given that headline inflation had significantly risen up to the fourth quarter of 2015 on account of food scarcity and exchange rate pressures that mounted in readiness for the 2015/16 growing season, it is very likely that inflationary pressures will remain elevated in the first quarter of 2016.”
But Ben Kaluwa, an economics professor at Chancellor College, a constituent college of the University of Malawi (Unima), in an earlier interview with The Nation, asked RBM to look into measures that correspond with the situation on ground.
He argued that the central bank dwells on an approach which is appropriate to developed market economics and not applicable to the Malawian market situation. He said unless this is revised, such trends would continue being experienced. n