The Reserve Bank of Malawi has announced an upward adjustment of the policy rate by two percentage points, from 22 percent to 24 percent. This is the second adjustment by the Monetary Policy Committee (MPC) within four months.
The adjustment was made due to intensifying price pressures and projected high inflation. In a statement released on July 27, 2023, signed by RBM Governor who is also MPC chairperson Dr. Wilson Banda, the Third Monetary Policy Committee Meeting revised upwards the policy rate to contain demand and reduce inflation towards the medium-term target.
The decision is likely to impact the Malawian economy by making borrowing difficult, potentially slowing economic growth, and dampening demand. The Centre for Social Concern (CfSC) has expressed concern that businesses, which rely on credit to finance their operations, may find it more difficult to obtain loans, leading to slower economic growth and increased default rates, while consumers may struggle to borrow money, affecting demand for goods and services. CfSC Programs Manager, Bernard Mphepo said:
Consumers may also find it more difficult to borrow money which could dampen demand for goods and services. This will have ripple effects on the lives of people.
Commercial banks may also implement reciprocal adjustments to the price of loans.
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