Reforms restoring Malawi’s financial sector credence

Economic reforms being implemented in the country are contributing positively to the financial sector where confidence has been brought back both locally and internationally.

Malawi’s largest commercial bank, the National Bank of Malawi (NBM), has said.

NBM Chief Executive Officer, George Partridge, told a media conference in Blantyre on Friday that Malawi’s credit risk has improved as a result of the on-going government economic reforms.

“Confidence which is a major ingredient [in financial business] and there is now light at the end of the tunnel for financial institutions in the country,” said Partridge.

He urged government not think of reversing the reforms as doing so will be suicidal.

“The authorities should persevere and should not reverse the current decisions. If the reforms are reversed, problems will increase. Even the exchange rate will run away and inflation will continue increasing,” said Patridge.

He recalled that before the new reforms, Malawi country risk worsened because of the economic policies that were being pursued.

The NBM boss said corresponding banks for Malawi’s financial institutions abroad were fearful to grant local banks lines of credit.

“That is why you saw that some of the credit or international trade or importation [facilities] which we were providing were curtailed,” said Partridge.

He said international suppliers were only willing to deal with Malawi on an upfront cash basis.

“Letters of credit were no longer accepted because of the country risk,” said Patridge.

He said this meant that the banks’ customers could not enter into business contracts with suppliers abroad and that payments on a cash front basis depended strictly on availability of foreign currency in the banks.

“This restricted importation of raw materials of goods and services and affected our customers. Once our customers are affected, the operations of the bank were affected as well in terms of foreign exchange [trading], borrowing for working capital and credit expansion,” he said.

He said, however, despite the foreign exchange challenge, NBM has continued to perform “extremely well” and did so in the year 2011, especially in the second half of the year.

He said the future looks even brighter as both tea and tobacco prices look positive.

He said, however, energy supply still remains a problem and it will take time to rectify.