Africa-Press – Malawi. The banking sector showed some signs of resilience in the first quarter of this year, registering positive liquidity after a long run of squeesed liquidity, figures from the Reserve Bank of Malawi show.
In its 2022 second Monitory Policy Report, the central bank says banking system liquidity conditions improved after three consecutive quarters of liquidity squeeze.
The report says the development was reflected in an increase in excess reserves before borrowing from the central bank (un-borrowed excess reserves) to an average of K31.8 billion per day from negative K77.0 billion per day recorded during the last quarter of 2021.
“Subsequently, commercial banks with liquidity shortfalls managed to increase borrowing from the interbank market and significantly reduced recourse on the Lombard facility.
“In particular, the daily average interbank market trading rose to K16.7 billion in 2022Q1 from K14.6 billion in 2021Q4, while the daily average access on Lombard facility fell to K15.1 billion from K89.7 billion during the same period,” the report reads.
Financial Market Dealers Association of Malawi President McLewen Sikwese said the outlook depends on how government will handle borrowing and matured Treasury bills and Treasury notes.
Information from the central bank shows that close to K1 trillion will be sucked from the financial market through reverse repos and government borrowing.
“There is therefore going to be pressure on the authorities to address the impending worsening liquidity situation which can be managed by targeted reverse repos, purchases of government securities and liquidity injection from foreign exchange purchases from the market,” he said.
Market analyst Cosmas Chigwe believes the maturity of reverse repos will be rolled over so that positive liquidity persists; otherwise, the sector may go back to having tight liquidity.
Tight liquidity affects interest rates negatively for consumers because people scramble for limited funds. Justin Mkweu is a fast growing reporter who currently works with Times Group on the business desk. He is however flexible as he also writes about current affairs and national issues.
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