RBM IMF facilities loss at K43 billion
The Reserve Bank of Malawi (RBM) incurred a K43 billion (about $107m) loss on revaluation of International Monetary Fund (IMF) facilities in the wake of the May 7 2013 devaluation and subsequent flotation of the kwacha.
The RBM 2012 report and accounts released last week further indicates that the central bank is grappling with implementation of monetary policy to rein in inflation and stabilise the exchange rate of the local unit incurred a K39 billion (about $97m) loss on foreign exchange revaluations.
RBM, whose capital according to the RBM Act is exclusively held by the government, ultimately realised a comprehensive total loss of about K33.5 billion down from a K4.4 billion (about $11m) profit before foreign exchange revaluations.
Malawi devalued the kwacha by 49 percent in May 2012 and subsequently floated it on recommendations by the country’s major donors including the IMF.
However, the report notes that the central bank is involved in policy-oriented activities and therefore its risk management framework differs from other financial institutions frameworks that are there to maximise shareholders’ return.
“The majority of the [RBM’s] financial risks arise from the foreign reserves management and domestic financial market operations. The main objective of the domestic reserves management is to ensure that the activities of the [RBM] are in line with stipulated statutes in order to ensure that there is no conflict of interest with the monetary policy framework and regulatory function as a central bank whilst that for foreign reserves management is to ensure that there is sufficient amount of liquid financial resources at any time to undertake interventions in order to maintain stability of the exchange rate and facilitate official transactions,” reads the report in part.
The report further indicates that RBM’s total assets increased by K91 billion (about $227m) during the year with major increases in balances with foreign banks, and advances to government.
The report further indicates that major increases in the liabilities were in borrowings, bankers’ deposits, notes and coins in circulation, and allocation of special drawing rights which were offset by a decrease in government deposits.
RBM is created and regulated by the Reserve Bank of Malawi Act of 1989 and its objectives include to issue legal tender currency in Malawi, to act as banker and adviser to the government, to maintain external reserves so as to safeguard the international value of the currency.
RBM is also mandated to implement measures designed to influence the money supply and the availability of credit, interest rates and exchange rates, to promote a sound financial structure, to promote a money and capital market in Malawi and to act as lender of last resort to the banking system.
