RBM to maintain monetary policy
The Reserve bank of Malawi (RBM) has said it will continue implementing a prudent monetary policy against a backdrop of a widening fiscal deficit in the 2014/15 proposed budget.
Speaking during the Bankers Association of Malawi (BAM) annual dinner and dance at Sunbird Mount Soche in Blantyre on Friday, RBM deputy governor (economics) Naomi Ngwira said the central bank will ensure the implementation of a prudent monetary policy, quashing fears of printing money to finance the glaring fiscal deficit in the budget.
Minister of Finance, Economic Planning and Development Goodall Gondwe last week presented a K742.8 billion budget with K107 billion fiscal deficit which he said would be financed through foreign borrowing.
Ngwira, however, said the performance of the economy last year was subdued by the Cashgate—the looting of money by public and private sector officials at Capital Hill.
“The performance of the economy in 2013 has been mixed and subdued by the Cashgate. Whilst the [monetary] reforms started yielding very positive results these were partly thwarted by the scandal.
“This brought us a step backwards bringing a lot of uncertainties as to which direction we were heading. With the assurances from the government, the central bank will continue to implement policies that aim at accumulating reserves and curb inflation such as the flexible exchange rate regime and deepening the export base,” she said.
Commenting on Basel II—recommendations on banking laws and regulations which started in January this year—Ngwira said the implementation is going on well, noting that positive progress has been made.
She also said there is progress in the implementation of the Automated Transfer System (ATS) another milestone in the financial sector and hoped that by end of this year, all commercial banks will be on board.
Speaking in an interview on the sidelines of the function, BAM president, who is also chief executive officer for CDH Investment Bank, Mishek Esau, said they chose to reflect on the implementation of Basel II because of the importance of the accords.
“Before Basel II implementation, Malawi was looked at as risky and the implementation of the accords has improved that,” he said.
Commenting on the huge profits that commercial banks make in Malawi, Esau said it was important that they make the profits.
He argued that better profits ensure that the banks become strong and stable, pointing out that the profits are turned into capital consequently making them bigger.
