Expert commends RBM on policy rate reduction

Professor of Economics at Chancellor College Ben Kalua has applauded the Reserve Bank of Malawi (RBM) for reducing the policy rate saying that it is progressive move towards revamping the country`s ailing economy.

According to RBM Governor Dr Wilson Banda who also chairs the Monetary Policy Committee (MPC) the reduction of policy rate from 13.5% to 12.0% will assist in supporting the economy amidst impacts brought forth by the Coronavirus pandemic.

Commenting on the reduction, Professor Kalua said the development will assist in improving economic growth through boosting businesses which normally rely on borrowing from commercial banks.

“It has an immediate impact, normal businesses do not rely on personal savings, and they rely on borrowing from banks so if borrowing rate is reduced it will indeed have an immediate impact,” Kalua said.

“Economies like Malawi we don’t have access to fiscal stimulus so reducing the policy rate it is advised to go for monetary as done by the Reserve Bank.”

According to Dr Banda, there are prospects that the reduction in policy rate will enhance economic growth as businesses will flock to commercial banks for borrowing.

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