RBM mops K15.5bn from market
The Reserve Bank of Malawi (RBM) mopped about K15.5 billion (about $38.7m) through open market operations (OMO) from the economy at 28 percent in a drive to maintain money supply.
OMO is an activity by a central bank to buy or sell government bonds on the open market as a primary means of implementing monetary policy, including the manipulation of interest rates and inflation.
RBM daily market statistics indicate that on November 7 2013, the discount window accommodated K1.6 billion at 25 percent whereas the interbank lending stood at K1.8 billion at 26.8 percent which has generally been rising since mid-July.
However, RBM spokesperson Mbane Ngwira, in an interview on Monday, noted that the indicated OMO was a reflection of transactions that took place on November 7 2013.
The November 7 RBM report indicates that the central bank injected K18.5 billion under foreign exchange transactions, that is bought foreign exchange from the market while releasing the local unit into circulation.
Said Ngwira: “To sterilise the effect of the injected money which was made through foreign exchange transactions, RBM withdrew K17.3 billion through open market operations. An injection may take 90 days to have an effect on the market. Within that period, we take out that money.”
He further noted that RBM has not missed its inflation target because a comparison of prices shows that they are not higher than last year’s by looking at the main determinants of inflation, including the exchange rate and the fuel price.
In September 2013, the inflation rate dropped to 21.7 percent as compared to 28.3 percent during the same period last year, according to the National Statistical Office (NSO).
However, RBM’s August 2013 notes show that consistent with expectations in the current fiscal framework, government continued to inject substantial liquidity into the banking system.
Reads the report in part: “A total of net OMO of K3.74 billion and foreign exchange sales K5.52 billion were not enough to sterilise the fiscal injections. As a result, a net injection of K9.5 billion was injected into the banking system.”
The August report notes that liquidity in the banking system improved during August 2013 due to continued substantial injections from net government operations in July and August 2013.
The RBM monthly report indicates that daily average excess reserves were highest in August 2013 at K12.9 billion, as a result, the weighted average interbank rate closed the month at 16.54 percent, about 8.5 percentage points below the Bank rate.
However, recently some commercial banks have been struggling to meet their liquidity requirements with come borrowing though the discount window and on the interbank market.
Thanks Innocent! My question is to RBM. In Malawi, why can’t we raise the standards instead of being satisfied with mediocrity? An inflation rate of over 20% is a disaster. This RBM report gives the impression that we are doing well compared to last year but last April we had an economic calamity. My two and half decade of professional experience tells me that there is no justification for a country to nurture and nurse inflation above 3% let alone 20% given our mathematical abilities to model economies. The UK inflation has just been announced at 2.2%. OK I heard that! Someone whispering that is the UK not Malawi. Unfortunately, that is the problem in this country. We do not aspire for the best but happy to settle for mediocrity in the name of “local solutions”. Why can’t we think globally and act locally, instead? For those advocating local solutions alone (which is narrow minded) where are they going to get excellence key performance indicators and benchmarks in Malawi?.
If someone offered you a deal to take a 20% salary cut would you take it? No. That is the deal RBM is offering Malawians of 20% salary cuts every year . Why is Malawi not calling on science, mathematics and engineering to solve its problems? As a result, everything has become a cryptogram to Malawians. Inflation is a cryptogram. Monetary policy is a cryptogram. Economic development is cryptogram. Economic growth is cryptogram. Job creation is cryptogram. Industrialisation is a cryptogram. All these cryptograms have already been deciphered. Inflation has already long been deciphered by hand, mathematically speaking.. just use the right mathematical formula to achieve step change. OMO yes, Currency Sterilisation yes, IMO yes, but what are your anchors? Inflation targeting (IT) is the only best practice instrument used by all successful countries. Otherwise the whole effort is mired in wasted pursuit of insignificant contemporaneous correlations and hypotheticals that provide no relief to the financial pain of the common man (and woman) in Malawi. This is real life situation affecting real people not hypothetical Hilbert quantum space. RBM can bring down inflation rate to below 5% through step change and save peoples salaries, lives and marriages.
What has the RBM mopped up, Cash Gate money?
There is no difference between what RBM prescribes for Malawians and what ” A katapila ” demand from there victims. This is legalised “katapila” full stop.
RBM mopping up the Cash gate money and actual difference that they give to ministries and the one in their books and grafted. Police please do your job at RBM and investigate the amounts they put in their books and said they gave to each ministry and the actual money that was deposited. Mphwiyo must have questioned this!!!!
301 Moved Permanently I was recommended this website by my cousin. I’m not sure whether this post is written by him as no one else know such detailed about my difficulty. You are incredible! Thanks! your article about 301 Moved Permanently Best Regards Agata Cindy