Commercial Banks in the country are expected to hike their lending interest rates from 17 per cent to 23 per cent. This follows the central bank’s decision to adjust upward the interest rates by 3 points on the money that the [commercial] banks borrow from the Reserve Bank of Malawi (RBM).
This new development also comes almost a week after the country’s central bank, announced 49 percent fall of the country’s currency, the Kwacha.
While confirming the development, RBM spokesperson Ralph Tseka, said these changes are in line the liberalization of the Kwacha. Tseka said effective May 11, 2012 the RBM has adjusted upward the interests’ rates by 3 points.
“I can confirm that with effect from today the central bank has hiked its interests on the money that the banks borrow from us. This is a monetary policy which follows the recent liberalization of the Kwacha,” said Tseka. He also said this applies to on food inflation which is now at 15% from 12%
Initially, the banks were paying 13% to the reserve bank while the commercial banks were charging their customers 17%.
This means Malawians will be forced to dig deeper into their pockets to service their loans.
This according a renowned economic expert, this is part of the strict financial measures government through the central bank is putting in place in order to avert inflation. “In simple terms what this means is that the Kwacha has become very expensive, people would think twice before getting a loan in the process reducing the circulation of the currency thereby eroding chances of inflation,” said the source who did not want to be named.
Bank rate going up means the cost of getting loans has gone up. For loans that were already taken, the borrowers will have to pay higher interests now. In business set ups it is inevitable to operate without overdrafts and loans. Businesses will now find it harder to access these loans when they do not generate as much income for their operational needs.