The Reserve Bank of Malawi (RBM) has released K12 billion into Malawi’s banks to enable the banks to support sectors hit by the Covid-19 in Malawi.
The bank announced the package in a Monetary Policy Committee statement dated 1st April, 2020 and signed by chairperson of the committee Dalitso Kabambe who is also Governor of the bank.
According to Kabambe ,the committee resolved to cut the Liquidity Reserve Requirement (LRR) on domestic deposits by 125 basis points to 3.75 percent from 5.0 percent.
“This reduction will immediately release primary liquidity of about K12 billion uniformly across the banking system in proportion to liabilities of the banks,” he said.
He added that the committee also resolved to reduce the Lombard Rate ( interest rate charged by central banks when providing short-term loans to commercial banks) by 50 percent to 0.2 percentage points above the Policy Rate to reduce the cost of accessing funds from the Central Bank.
The central bank hopes this will enable commercial banks to pass on the benefits to borrowers.
“These decisions were deemed necessary to ease banking system liquidity constraints and incentivise commercial banks to adequately support the sectors that are hit by the COVID-19 pandemic,” he said.
He, however, added that the MPC decided to maintain the Policy Rate at 13.5 percent to mitigate against potential upward risks from the pandemic while monitoring developments as they evolve and act as and when necessary.
Malawi on Thursday announced three cases of the Covid-19, the first cases in the country since the outbreak began in China last year.
The coronavirus has spread to over 200 countries worldwide with Over 950,000 cases and more than 48,000 deaths being recorded.
To prevent the spread of the coronavirus in Malawi , government has imposed travel restrictions, banned public gatherings and closed schools, among other measures.