The Reserve Bank of Malawi (RBM) says it will focus on price and financial stability to maintain single digit inflation this year and achieve a medium-term inflation objective of five percent.
In its report and accounts for the year ended December 31 2017 released on Wednesday, RBM Governor Dalitso Kabambe said they also intend to achieve an adequately capitalised and stable financial system.
He said strategies to achieve these objectives include maintaining appropriate monetary and financial policies.
“We want to ensure that monetary and financial policies are correctly formulated, implemented and communicated. The bank will thus ensure that monetary policy conduct is consistent with achieving projected low inflation targets.
“Further, the bank will ensure that government’s operations with the central bank are conducted within the confines of the parameters which contribute to the country’s macroeconomic stability,” said Kabambe in the report.
Over the past two years, inflation rate has been declining up to the point of hitting a single digit last year. The rate is at 9.7 percent as of May 2018, according to the National Statistical Office (NSO).
On the other hand, RBM said it also aims at maintaining official foreign exchange reserves of not less than three months of import cover by managing national foreign exchange reserves in line with international best practices.
Through the Export Development Fund (EDF), RBM seeks to complement government-wide measures aimed at unlocking the supply-side potential of the economy to generate more foreign exchange.
Between January and November last year, Malawi lost $7.4 million (about K5.4 billion) to illegal foreign exchange externalisation, according to a recent report from the Financial Intelligence Authority.
But Kabambe said the central bank will this year ensure that transfer pricing and illegal externalisation of foreign currency is reduced to safeguard foreign exchange reserves.
The central bank says it will continue to supervise financial institutions to ensure that the financial industry is safe, sound and stable.
In the 2018/19 National Budget Statement, Minister of Finance, Economic Planning and Development Goodall Gondwe said government sees economic growth at 4.1percent and six percent in 2018 and 2019, respectively.
He said he is banking on the many infrastructure development projects lined up in the energy and agriculture sectors, which he described as growth enablers.
Gondwe said government is committed to continuing implementing sound macroeconomic policies aimed at spurring growth and creating jobs by focusing on productive sectors outlined in the Malawi Growth Development Strategy (MGDS) III. n