Africa-Press – Malawi. The Reserve Bank of Malawi (RBM)’s five year capital markets development plan appears to have failed key objectives and has been extended to next year after implementation challenges.
The strategy was rolled out five years ago with, among other targets, increasing the number of listed companies to 24, increasing the share of corporate bonds to GDP to reach 1.25 percent, pushing the ratio of equity market capitalization to GDP to 55 percent and increasing government financing through capital markets to 60 percent.
The plan envisaged that the capital markets, supported by legal and regulatory frameworks, would be the primary source of long term financing for investment.
However, as the strategy comes to an end the overall objective of channeling national savings towards long term industrial financing appears to have not been met. For instance, no corporate bonds have been registered while the number of listed companies remains 16 out of the targeted 24.
Both RBM and Malawi Stock Exchange (MSE) admitted that the strategy has struggled to achieve some objectives despite some progress registered.
In a response to a questionnaire sent to RBM on the performance of the strategy, the central bank spokesperson Boston Maliketi Banda said the strategy met a number of implementation challenges, leading to delays and will now expire next year.
“Beyond the (Covid) pandemic, the plan’s progress has been further hindered by a challenging macroeconomic environment. Low GDP growth has limited the potential for company listings, while high inflation and interest rates have discouraged corporate bond issuance,” Banda explained.
He further said despite these hurdles private placements that are functionally similar to corporate bonds but privately subscribed, have shown notable growth.
He added: “Additionally, the shift in government debt composition, with Treasury notes now making up around 70 percent of issuance compared to Treasury bills, reflects some success.”
However, the central bank believes it has laid a strong foundation to build on, although success has not shown as expected.
MSE Chief Operating Officer, Kelline Kondowe, in a separate interview cited as progress the growth of the bond market that has seen the listing of government bonds which provides a secondary trading platform for bondholders.
Kondowe further said the MSE will be graduating some SMEs that have been grilled to list on the local bourse. She added that some things remain outstanding in the plan.
Economist Lesley Mkandawire urged for improved market regulation to be more attractive to investors, adding that data availability to inform investors.
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