RBM resources expand 30%
The Reserve Bank of Malawi (RBM) resources expanded by 30 percent to K346.1 billion (about $865m) in the second quarter (Q2) from K266.4 billion (about $666m) recorded in the preceding quarter, official figures indicate.
RBM Q2 economic review, released last week, attributes the resource expansion of K79.7 billion to unsectored liabilities which accounted for K47.5 billion of the accumulated resources, the bulk of which was net income gain realised from the appreciation of the kwacha observed in the quarter under review.
Explaining how the appreciation of the kwacha in the review period impacted the increase in income of the central bank, RBM spokesperson Mbane Ngwira, in an interview on Tuesday, attributed the increase to exchange rate gains.
“The central bank’s resources include assets and liabilities. The appreciation of the kwacha meant that the value of liabilities denominated in foreign currencies reduced, translating into higher income. An increase in the central bank’s resources is usually linked to an increase in foreign exchange reserves which are good for the economy in terms of import cover,” said Ngwira.
During the review period, according to the RBM, the kwacha appreciated by 17.2 percent against the dollar, by 16.5 percent and 15.5 percent against the sterling pound and the euro.
According to RBM daily financial market reports official gross foreign exchange reserves rose to $457 million (2.43 months import cover) on June 25, from $183 million (0.97 months) on March 28.
The quarterly report also indicates that currency outside banks also increased by K35.5 billion due to realisation of proceeds from agricultural produce sales by economic agents.
RBM notes that upon receipt of substantial donor financing during the quarter under review, the official sector also added on K16.2 billion to the RBM’s resource envelope through deposits.
However, it adds that in contrast, foreign sector deposits dropped by K10.7 billion largely due to effects of the kwacha appreciation.
During the period under review, official sector deposits declined by K6 billion following drawdown made by some statutory bodies for capital investments.
The central bank adds that in terms of utilisation, commercial banks used the accumulated resources to boost investments in the domestic sector.
In particular, the report notes lending to government increased by K6.2 billion through uptake of treasury bills.
