Economic analysts say the lagged effects of the Covid-19 pandemic on the economy, depreciating exchange rate and inflationary pressures call for authorities to reflect on the architecture and conduct of the monetary policy.
The analysts said this in the context of the upcoming Monetary Policy Conference to be hosted by the Reserve Bank of Malawi (RBM) on Thursday and Friday this week under the theme ‘Monetary Policy in the 2020s’.
The country’s monetary policy, which guides the management of money supply and interest rates to meet macroeconomic objectives, is for now meant to support economic recovery from the Covid-19 crisis and stimulate further growth, according to analysts.
Speaking in an interview on Saturday, economic and market analyst Bond Mtembezeka said monetary policy is dynamic, as such, the conference has come at a good time when the country is facing an economic shift.
He said: “Globally, monetary policy has evolved from intermediary targeting to the present inflation targeting where the framework of monetary policy has evolved in a manner that has responded to the ever changing economic environment.
“Therefore, the conference should be an opportunity for monetary authorities to ask themselves very important, but basic questions like, is the present architecture of monetary policy ideal? Is it yielding results? What else can be done to make it robust?”
Economic statistician Alick Nyasulu said in an interview that the most worrying issue is the rising inflation rate now at 25.5 percent as of August, a situation he said calls for a reflection on policy issues.
He said: “As is often the case, this tends to force central banks all over the world to increase interest rates.
“It will be interesting to see how the monetary policy will decide to increase the policy rate which under such instances tends to go up to tame the rising inflation.”
Malawi University of Business and Applied Sciences economics lecturer Betchani Tchereni said the conference will provide a platform for discussion, adding that this is now an inevitable environment for a review of the monetary policy.
“Where we stand, we have such a huge demand for imports which is likely to push the depreciation of the kwacha further, causing imported inflation,” he said.
In its July 2022 report, Nico Asset Managers Limited said with increasing prices continuing to squeeze living standards worldwide, taming inflation should be the first priority for policymakers.
The firm also observed that tighter monetary conditions will also affect financial stability, requiring judicious use of macro prudential tools and making reforms to debt resolution frameworks more necessary.
Meanwhile, RBM has described the conference as a right forum to provide the right platform to brainstorm issues affecting monetary policy with all relevant sectors of the economy to enhance monetary policy in the current policy environment.
Said the RBM in a statement: “The Covid-19 global pandemic has, among other effects, compelled central banks to deploy unconventional monetary policy measures in order to support economic recovery while at the same time being mindful of the price stability objective.”
The policy rate, the rate at which commercial banks from the central bank as the lender of last resort, is 14 percent.