The Reserve Bank of Malawi (RBM) has reported a net profit of K356 billion in the year ended December 2024, a huge turnaround from K539 billion loss in 2023 largely buoyed by a drop in foreign exchange losses.
Published financial results contained in the RBM Annual Report 2024 signed by Governor McDonald Mafuta Mwale show that the profit before foreign exchange revaluations was recorded at K404.9 billion.
Reads in part the statement accompanying the financial results: “The group recorded a comprehensive profit of K409 billion for the year ended December 31 2024 and had foreign liabilities of K2.7 billion against foreign assets of K582.6 billion as at December 31 2024.
“The bank’s solvency is guaranteed in the Reserve Bank of Malawi Act, which states that the government shall ensure that the bank is kept solvent at all times.”
Among others, RBM recovered from the huge foreign exchange losses incurred in 2023 as it only reported a K48 billion loss in 2024 from K708 billion in 2023 on the back of a 44 percent kwacha devaluation in November 2023, which resulted in the central bank posting a K539 billion loss.
RBM has registered a 17.7 percent increase in its asset base from K4.2 trillion in 2023 to K5.1 trillion in 2024, according to the financia results.
Money market analyst Bond Mtembezeka said in an interview yesterday that the central bank’s exposure to foreign exchange rate shocks results from its role of building reserves, which exposes it to foreign liabilities.
He said it is difficult to hedge against such exposures at any point as RBM always has huge foreign exchange positions.
“Generally speaking, exchange rate risk can be hedged through the employment of derivative instruments such as forwards and options and the Reserve Bank of Malawi has access to such instruments.” said Mtembezeka.
Following a loss of K539 billion posted in the 2023/24 financial year, the Ministry of Finance and Economic Affairs gave RBM a K600 billion bailout.
In an earlier interview, economist Leslie Mkandawire said since the RBM is owned by the Malawi Government, some losses require reverse transfers from the Treasury to RBM for recapitalisation.
He said: “In order to protect the public, the central bank takes hard decisions to regulate the market by intervening to keep interest rates low and exchange rates stable apart from the costs of printing money and operations.
“To ensure liquidity on the financial market, the central bank has to trade in the international market to acquire the reserves.”
This year, the RBM said directors have assessed the group’s ability to continue as a going concern and have reasonable expectation that the bank has adequate resources and the support of the government to continue in operational existence for the foreseeable future.
