FDH says the growth in money supply is partly explained by continued foreign exchange scarcity in the market and lack of demand for huge local development and project financing.
“Financial institutions do not normally have lucrative money markets to place their funds in,” said the FDH February 2009 economic report.
It further says the challenge is that those institutions that are currently pursuing huge projects in the country rely on cheaper offshore funding and this translates into lower demand for the local currency.
FDH observes that assuming interest rates fall further to affordable levels; the question that still remains is that will the multinational companies shift their focus to the local banks or will they continue to borrow offshore through their mother companies?
The firm says if the economy has to progresses further, these are the issues that must be addressed by authorities.
There is hope that Malawi's biggest venture so far, the Kayelekera Uranium Mining, starting its exports later in the year, will bring in much needed foreign currency.
