Malawi cuts interest rate to 13%

Malawi’s central bank cut its key interest rate to 13 percent from 15 percent on Saturday, citing easing inflation and the need to boost the private sector in light of slightly weaker growth projections.

“The decision to reduce the Bank rate was made in light of the good progress made in reducing inflation to its current level of 7.5 percent,” the bank said in a statement.

“The Monetary Policy Committee also noted the strong economic growth projected for 2010 and the need to encourage private sector investment and production.”

The landlocked southern African nation’s central bank left rates unchanged in May, due in part to a shortage of foreign currency putting pressure on the domestic unit, the kwacha.

However, Governor Perks Ligoya said at the time that falling forecasts for inflation and economic growth, due mainly to a prolonged dry spell hitting farming output, left the door open for later reductions in lending costs.

One of the world’s fastest growing economies in the last few years, Malawi is expecting 6.5 percent expansion this year, compared with earlier projections of 7.0 percent.

Annual inflation slowed to 7.5 percent in June from 7.8 percent the previous month due to lower food prices.

The International Monetary Fund lent Malawi nearly $80 million in February to try to ease a foreign exchange shortage that government officials blamed on slow aid disbursement by donors and poor receipts from sales of tobacco, its main export.

Huge fuel and fertilizer import bills in 2009 also added to the dollar supply crunch.

Source: Reuters