RBM maintains policy rate

Reserve Bank of Malawi

The Reserve Bank of Malawi (RBM) has maintained the policy rate at 16 percent.

Speaking at a press briefing, Reserve Bank Governor Dalitso Kabambe said the Monetary Policy Committee (MPC) at its meeting this week decided to maintain the current policy to consolidate the gains made so far, especially the achievement of a single digit inflation.

Reserve Bank of Malawi
Kabambe: Low level inflation economy is good for a country.

The bank hopes that inflation will eventually be reduced to 5 percent in the medium term.

Kabambe who is also chairman of the MPC said having a single digit inflation is one of remarkable achievements the country has made since 2011.

“Low level inflation economy is good for a country. What it means is that goods and services in the economy will not be going up faster as they used to happen in the past.

“Malawians will know that back in 2012 prices either of food or bus fares were skyrocketing because pump prices were going up rapidly but also maize prices were going up rapidly.

“That’s not the case now. We have an economy of low inflation regime that prices could be going up but at a much slower pace and at a smaller margin,” Kabambe said.

He also added that Malawi Energy Regulatory Authority (Mera) records shows that the price of fuel has remained the same for almost 18 months.

The RBM projects that inflation will remain in single digit throughout 2018.  The projected outturn in inflation, the bank says, will come on the back of tight monetary policy and improved food supply.

“However, a possible further increase in utility tariffs and potentially unchanged fiscal policy stance pose upside risks to this inflation outlook,” Kabambe said.

During the meeting, the MPC also maintained the Liquidity Reserve Requirement (LRR) at 7.5 percent.

According to RBM, Malawi’s economy grew by an estimated 5.1 percent in 2017 on the back of a bumper harvest, recovering from a subdued growth of 2.7 percent in 2016.

In 2018, the bank says, economic activity is projected to moderate to around 4 percent on account of irregular rainfall pattern during the growing season and the spread of fall army worms.