Interbank rates at 17 percent
Interbank lending rates dropped to 17 percent, while required reserves rose to over K42.4 billion on August 21, a sign of improved liquidity, indicates the Reserve Bank of Malawi (RBM) daily market report.
The central bank’s report indicates that the interbank lending rates—the interest payable between banks—dropped from 28 percent on July 19 to the current rate, an indication that commercial banks are now not desperate to borrow to cushion their cash reserves for a possible customer overrun.
The report further indicates that during the same period, required reserves—a fraction of deposits that commercial banks are supposed to keep at the central bank currently pegged at 15.5 percent—rose from K39.4 billion to K42.4 billion in the period under review.
The drop in interbank lending rates and the improved deposits in the sector is an indication that commercial banks are enjoying improved liquidity which may translate into lower commercial interest rates.
However, the RBM base lending rate and the liquidity reserve requirement—monetary tools that are primarily used to control money supply and rein inflation—have been maintained at 25 percent and 15.5 percent since December last year.
Malawi’s inflation rate has been declining since March after peaking at 37.9 percent in February this year according to the National Statistical Office (NSO). The June inflation further dropped to 27.9 percent before declining to 25.2 percent in July.
