Scale up market efficiency, RBM urges financial dealers
Financial dealers in the country have been urged to be on the forefront in ensuring that markets are functional and efficient.
Reserve Bank of Malawi (RBM) Governor Charles Chuka made the urge on Saturday last week during the opening of a three-day annual conference of the Financial Markets Dealers Association (Fimda).
“Our commitment is to pursue prudent monetary policies to consolidate the macroeconomic gains achieved so far,” he said.
He added that monetary policy would be geared towards accumulating foreign exchange reserves to safeguard the value of the kwacha.
He further underlined that RBM would ensure that the interest rate structure, apart from containing any risks to inflation, would be conducive to growth in the long run.
He, however, noted that these policies require functioning and efficient markets to function effectively.
“In this regard we expect Fimda to be in the forefront by introducing trading practice guidelines that would further market efficiencies and transparency.
“If Fimda as a self-regulating organisation [SRO] is failing to do this, should we step in and introduce such guidelines?” he said.
With the kwacha currently experiencing what Finance Minister Goodall Gondwe termed ‘sharp depreciation’, Chuka could not, however, commit as to when government would intervene in the markets to safeguard the national currency from further plunge.
Speaking at the same conference, Gondwe called on Fimda to partner with government in ensuring the prudent management of the foreign exchange.
“As private dealers, you have a role to play. Besides that, we also expect you to generate more forex apart from just looking to government for support. In other countries, private dealers generate more foreign exchange on their own,” he said.
By last week Friday, the dollar was selling at a record K480 from K410 in September. Currently Malawi has a reserve of $400 million which analysts say is an equivalent of over two months of import cover—something Chuka says is low given the growth in the economy and the continuing yawning gap in the current account.
Gondwe—who advised the citizenry to watch over their spending and consuming habits—added that the current kwacha depreciation is seasonal and government is doing all it can to scale up its reserve.
Fimda’s re-elected president Alfred Nhlema called on financial dealers in the country to practice with honesty and integrity.
He assured government of continued support from the dealers.
Other high profile figures who attended the conference included Geoffrey Oestreicher—IMF Resident Representative; and Sneha Shah, head of Financial Business, Thomson Reuters.
