Weekly evolution of the financial markets 31 January







FINANCIAL MARKETS DEPARTMENT

WEEKLY DEVELOPMENTS IN FINANCIAL MARKETS

(31 JANUARY – 04 FEBRUARY 2022)

Main Highlights

Gross official foreign reserves decreased by US$3.4 million to close the finished week 4and February 2022 at $399.7 million (1.59 months of imports).

The kwacha performed well against major currencies used by residents in international trade. The Kwacha closed the week of revision at 823.4362 KK per US dollar.

Liquidity conditions in the domestic money market have tightened during the period under review with the excess reserves of commercial banks, before borrowing from the central bankwith a negative average of 29.0 billion K per day against a positive value of 11.7 billion K per day recorded during the previous week.

Take-up improved at the primary treasury bill auction, albeit slightly. The cumulative Treasury securities allocation ratio on planned issuances in fiscal year 2021/22 decreased from 57.49% to 57.54%.

Gross official foreign reserves decreased by US$3.4 million to close the finished week 4and February 2022 at $399.7 million (1.59 months of imports).

Activity in the retail forex market declined after four consecutive weeks of increases. ADBs purchased a total of US$21.44 million which was supplied by their clients during the reporting period, compared to US$26.15 million recorded during the previous week. At the other end, ADBs managed to satisfy demand worth $21.71 million, as captured by ADB sales, compared to $25.90 million recorded the previous week. Market supply remains low historically and relative to corresponding demand.

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The kwacha performed well against major currencies used by residents in international trade; rising in value against the US dollar, the British pound and the euro. Nevertheless, the kwacha lost value against the South African rand. The local unit gained 0.09% (74 tambala) against the US dollar, 0.81% (K10.36) against the British pound, 0.18% (K2.04) against the euro and lost 0, 79% (50 tambala) against the South African dollar. Rand. The Kwacha closed the week of revision at 823.4362 KK per US dollar.

Liquidity conditions have tightened on the domestic money market reflected by the fall in excess reserves of commercial banks, before borrowing from the central bank, to negative K29.0 billion per day from positive K11.7

billion per day recorded during the previous week. The decrease is due to the maturing of reverse repos. Consequently, commercial banks were less able to cover liquidity shortfalls by borrowing on the interbank market and therefore increased recourse to the Lombard facility. Interbank market trading decreased to K8.8 billion per day from K13.7 billion per day recorded during the week ended 28and January 2022, while access to the Lombard facility increased from K14.2 billion per day to K29.0 billion per day.

The overnight interbank market rate (IBR) has remained stable at 11.70% since 19and January 2022. Therefore, the IBR remained within the target corridor of +0.2/-4.0percentage points around the policy rate, as provided for in the current monetary policy framework.

Central bank operations with commercial banks were restrictive and withdrew a net amount of K2.5 billion from the banking system. The development follows a net withdrawal of K40.3 billion recorded during the week ended the 28thand January 2022. During the review period,

cash withdrawals were from government net revenue collection against expenditure which drained K 12.1 billion from the banking system, commercial bank foreign exchange withdrawals from the central bank to meet customer demands which drained An additional K9.9 billion, and the central bank’s net foreign exchange transactions with commercial banks which withdrew K0.2 billion. These withdrawals were partly offset by cash injections from the net maturity treasury securities amounting to K15.6 billion and net open market operations (OMO) totaling K4.1 billion.

Take-up improved at the primary treasury bill auction, albeit slightly. During the review week, the government deposited treasury bills in accordance with the issuance schedule. A total of K10.9 billion was subscribed and fully allocated against a planned issuance of K18.1 billion. This represents an allocation ratio on planned issuances of 60.36%.

This development has led to an increase in the cumulative allocation ratio of Treasury securities compared to the planned issuances in the financial year 2021/22. at 57.54% versus 57.49% and the allocation to subscription ratio at 93.43% versus 93.31%.

Warning

Reserve Bank of Malawi published this content on February 11, 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unmodified, on February 11, 2022 09:27:03 UTC.

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