The reduction in policy rate in May this year by 100 basis points to 13.5 percent is yet to impact the commercial bank’s savings rate, it has been established.
The savings rate has been maintained at 4.58 percent since the first quarter when the policy rate fell by another 100 basis points to 14.5 percent.
RBM spokesperson Mbane Ngwira in an interview on Monday explained that maintaining the savings rate effectively reduces the spread between savings and lending rates.
“This means that banks are becoming more efficient. Thus, it is expected that banks will be able to raise more savings,” he said.
Over the years, despite the financial reforms such as interest rate liberalisation, savings rates have continued to dwindle inconsistently at five percent of gross domestic product [GDP] in 1990, minus three percent in 1993, 10 percent in 1994, minus four percent in 1996 and minus two percent in 1999).
At 2.9 percent, Malawi’s national savings rate is below the recommended average of 12 percent, which negatively affects economic development.
Conventional wisdom could tell that the higher the savings rate the country registers should naturally result in the rapid growth of GDP.
When household savings are deposited in the commercial banks they contribute to private savings and become available in the national accounts.
Consumers Association of Malawi (Cama) executive director John Kapito observed that while there has been a significant drop in the policy rate, the market has not fully responded to the reduction.
“We expected that with this huge drop in interest rates, the market will be resuscitated and that the level of disposable incomes would improve and that there will be a lot of activity on the market,” he said.
Ealier, Bankers Association of Malawi (BAM) said Malawi is yet to reach to the levels where it could have desired savings rate as the country is yet to embrace production.