Malawi Central Bank Policy Interest Rate at 25% in February

LILONGWE, Malawi, Capital Markets in Africa — Reserve Bank of Malawi Monetary Policy Committee (MPC) met on 4th February 2015 and decided to maintain the Policy Rate at 25 percent and Liquidity Reserve Requirement (LRR) at 15.5 percent, according to statement on the central bank website.

The Bank estimated the country real GDP growth at 6.3 percent for 2014, largely driven by the agricultural sector. For 2015, economic growth was earlier projected at 5.8 percent, but may be revised downwards due to late on-set of rains and floods. On global front, the global economy is expected to grow by 3.5 percent in 2015 and further pick up to 3.7 percent in 2016. Oil prices reached a five year low of US$46.0 per barrel in January 2015, representing a 55.0 percent drop since June 2014, following excess supply on the market.

The Committee noted that inflation outcomes for the second half of 2014 were generally higher than during the second half of 2013, mainly attributed to the sharp depreciation of the Malawian Kwacha and increases in non-food prices. The rate of inflation closed the year 2014 at 24.2 percent. Looking ahead, inflation is expected to trend downwards to around 15.0 percent by June 2015 on account of the appreciation of the Kwacha and reductions in fuel prices.

Monetary policy was tighter in 2014 compared to 2013. Consequently, money supply growth fell to 18.0 percent in December 2014 from a high of 32.5 percent in January 2014, largely due to decline in net domestic credit. In addition, the Committee observed that average annual money supply growth for the year 2014 was at 22.2 percent against 31.3 percent in the year 2013.

Gross official reserves stood at US$597.91 million or 3.13 months of imports as at end December 2014 compared to US$403.16 million or 2.11 months of imports recorded in December 2013. The increase was due to both purchases from the market and sale of government debt to external institutional investors. Consequently, the Kwacha appreciated against major currencies in December 2014, the Reserve banked hinted.