FINANCIAL MARKETS DEPARTMENT

WEEKLY FINANCIAL MARKET DEVELOPMENTS

(13 - 17 DECEMBER 2021)

Main Highlights

Gross official FX reserves declined by about US$36.4 million to close the review period at US$411.8 million (1.65 months of imports).

The Kwacha appreciated against the US dollar but lost value against the British Pound, the Euro as well as the South African Rand. The local unit gained 0.09% (70 tambala) to close the review period at K823.4654 per US dollar.

Liquidity conditions in the domestic money market remained very tight with daily average commercial banks' excess reserves, before borrowing from the central bank, averaging negative K116.1 billion per day.

Treasury bills and treasury notes auctions were significantly under-subscribedand under-allotted. The cumulative Treasury securities allotment to planned issuance ratio in 2021/22 fiscal year, declined to 44.63% from 45.01%.

Gross official FX reserves declined by about US$36.4 million to close the review period at US$411.8 million (1.65 months of imports). This erodes US$51.6 million gain recorded during the preceding week.

Activity in the FX retail market picked up considering the levels typically observed during the lean season. ADBs purchased a total of US$37.11 million from their customers compared to US$29.42 million recorded during the preceding week. On the demand side, ADBs sold a total of US$37.22 million compared to US$28.57 million recorded during the preceding week.

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The Kwacha appreciated against the US dollar. In process, the local unit gained 0.09% (70 tambala) to close the review period at K823.4654 per US dollar.

During the same period, the Kwacha lost value against the British Pound, the Euro as well as the South African Rand. The Kwacha lost value to the tune of 2.82% (K33.30), 5.31% (K55.42) and 1.76% (K1.03) against the British

Pound, the Euro and the South African Rand respectively.

Liquidity conditions in the domestic money market tightened further during the review period as captured by daily average commercial banks' excess reserves, before borrowing from the central bank, which recorded a negative K116.1 billion, from negative K85.5 billion observed during the previous week. Access on the Lombard facility surged higher to K113.2 billion per day from K109.9 billion per day. Similarly, trading on the interbank market was higher, from the K9.6 billion per day recorded during the week ending 10th December to K11.1 billion per day during the review week.

The IBR remains firm and closely aligned to the policy rate at 11.98 percent. Thus, the IBR continues to be within the target corridor of +0.2/-4.0percentage points around the policy rate.

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fiscal year, to 44.63% from 45.01%, and increased allotment to subscription ratio, to 90.06% from 89.93%.

Total central bank operations with the commercial banks were contractionary during the review week, withdrawing a net of K21.4 billion from the banking system. Central bank's net foreign exchange operations withdrew a total of K17.6 billion. Net issuance of government debt securities removed a further K12.2 billion from the banking system. On the other hand, a total of about K6.5 billion was injected through net lending on the Lombard facility followed by net government operations of K2.0 billion. A reduction in currency in circulation injected a about K0.2 billion.

Primary auctions for Treasury securities were significantly under-subscribed and under-allotted.On the Treasury bills primary auction, a total of K4.3 billion was subscribed and fully allotted against planned issuance of K16.0 billion. This represents an allotment to planned issuance ratios of 26.76%. During the week, there was a reopening of three Treasury notes. A total of K0.1 billion was subscribed and fully allotted. The developments led to a decrease in cumulative Treasury securities allotment to planned issuance ratio in 2021/22

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Reserve Bank of Malawi published this content on 22 December 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 December 2021 14:06:16 UTC.