Weekly developments in financial markets 18

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FINANCIAL MARKETS DEPARTMENT

WEEKLY DEVELOPMENTS IN THE FINANCIAL MARKETS

(18 – 22 OCTOBER 2021)

Main highlights

Gross official currencies closed the review week at US $ 399.5 million (1.60 months of imports).

The Kwacha depreciated slightly against major currencies. The Kwacha closed at 822.7737 K to the US dollar on the 22sd October 2021.

Liquidity conditions on the domestic money market have deteriorated The daily excess reserves of commercial banks have declined.

Subscriptions during auctions of Treasury securities were not sufficient to cover the planned issues. Both treasury bills and notes have been fully allocated.

Gross official foreign exchange reserves fell by US $ 18.0 million to end the review period at US $ 399.5 million (1.60 months of imports). This is compared to a decline of US $ 50.6 million recorded in the previous week.

Supply in the retail foreign exchange market improved but remained weak relative to demand. Authorized Distribution Banks (ADBs) bought a total of US $ 35.3 million in the market, compared to US $ 16.3 million in the week ending 22sd October 2021.

The Kwacha has depreciated against all major currencies, namely the US dollar, the euro, the pound sterling and the rand. The Kwacha lost 0.07% (0.62 K) against the US dollar to settle at 822.7737 KK per US dollar after gaining 0.08% (0.64 KK) the previous week. Local unit was 0.73% (8.67K), 2.95% (30.53K) and 1.81% (1.09K) weaker against the pound sterling, the euro and the South African rand, respectively.

Liquidity conditions on the domestic money market were more stringent during the period under review. Daily excess reserves of commercial banks, before borrowing from the central bank, on average K53.7 billion negative against K K36.0 billion negative recorded during the week ended 14e October 2021. However, commercial banks’ access to the Lombard facility declined to an average of K 53.4 billion per day, compared to K 71.8 billion per day recorded the previous week. Banks were able to finance their deficits overnight on the interbank market, where trade averaged K18.7 billion per day against K10.5 billion per day observed during the week ended 14e October 2021.

The IBR remained stable and closely aligned with the policy rate at 11.98 percent.

Thus, the IBR continues to be within the target corridor of + 0.2 / -4.0 percentage points around the key rate.

During the review week, the central bank’s total operations with commercial banks were down, removing a net amount of about K 5.5 billion from the banking system. Net open market operations and issuance of Treasury securities took K10.6 billion and K13.6 billion, respectively, from the banking system. On the other hand, government operations provided K 6.6 billion, with currency in circulation increasing by K 12.1 billion.

Subscriptions for Treasury securities were not sufficient to cover the planned issues. Both treasury bills and treasury bills have been fully allocated, although treasury bills have been subscribed. The government raised a total of K 15.4 billion against a planned issue of K 54.1 billion. A total of K 8.2 billion was raised on the primary treasury bill market against a subscription of K 8.2 billion and a planned issuance of K 8.2 billion. This represents an allocation / subscription ratio and a planned allocation / issue ratio of 100%. On

99.7 percent of the award went to the 364-day term. A total of K7.2 billion was raised on the primary treasury bill market against

subscription of K 7.2 billion and planned issue of K 45.9 billion. This represents an allocation / subscription ratio and an allocation / expected issue ratio of 100% and 15.7%, respectively. The above reduced the cumulative Treasury securities award ratio over the expected issue ratio for fiscal year 2021/22 to 45.5% from 47.5% and increased the cumulative subscription award ratio at 86.36% against 85.5%.

Disclaimer

Reserve Bank of Malawi published this content on October 26, 2021 and is solely responsible for the information it contains. Distributed by Public, unedited and unmodified, on October 26, 2021 03:25:05 PM UTC.

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