Malawi moves up on Africa financial markets index
Malawi has been ranked 10th out of 23 economies on the 2021 Africa Financial Markets Index (Afmi).
The ranking on financial market regulation is an improvement from position 18 which the country scored in 2021 and also represented an improvement to a score of 48 percent from 37 percent scored in 2021.
Afmi is a composite index that measures the level of development of the financial market in African countries against international standards and best practice.
It assesses a country using six pillars namely, market depth which examines size, liquidity and depth of markets and diversity of products, access to foreign exchange, market transparency, tax and regulatory environment, capacity of local investors, macroeconomic opportunity and enforceability of standard master agreements.
Prepared by Absa, a South Africa based financial services group, the report indicates that though Malawi did well on the enforcement of standard master agreements pillar, it fell short on other key areas in the area of access to foreign exchange necessary to attract investment.
Reads the report in part: ”Though the country showed improvements when compared to the previous year, the country recorded the most significant drop in reserves among index countries.
“As a result, Malawi’s total portfolio investment flows to reserves ratio increased significantly, signalling potential difficulty in meeting foreign currency demand from investors.”
In the past year, the kwacha has been volatile due to a decline in foreign exchange supply which in turn excertted pressure on the country’s foreign exchange reserves.
During the period, the kwacha depreciated by 5.91 percent, closing at K816.40 to the dollar compared to K770.84 to the dollar registered in 2020.
On the other hand, gross official forex reserves under the direct control of the Reserve Bank of Malawi declined from $502.98 million, an equivalent of 2.41 months of imports in January 2021 to $429.17 million, an equivalent of 1.72 months of imports in December 2021.
In terms of the market depth pillar which mostly centres on capital markets development, Malawi Stock Exchange (MSE) is upbeat that projects undertaken in the stock market as well as the country vice chairmanship in the Sadc Stock Exchanges will help elevate the profile of the country’s financial market.
MSE chief executive officer John Kamanga said: “We are certain that we are moving in the right direction in terms of aligning our capital market with best international practices.”
