Monthly Economic Review January, 2003 1 1.0 HIGHLIGHTS ...
Monthly Economic Review
1.0 1.1 1.2 1.3 1.4 1.5
January, 2003
HIGHLIGHTS ............................................................................................................................................. 3 INFLATION .................................................................................................................................................. 3 EXCHANGE RATES ...................................................................................................................................... 3 INTEREST RATES ......................................................................................................................................... 3 GROSS RESERVES ....................................................................................................................................... 3 MONEY SUPPLY ......................................................................................................................................... 3
2.0
DOMESTIC INFLATION......................................................................................................................... 4
3.0
EXCHANGE RATES .................................................................................................................................. 5
4.0
INTEREST RATES..................................................................................................................................... 7
5.0 GROSS FOREIGN RESERVES..................................................................................................................... 8 5.1 6.0 6.1 6.2 7.0
PURCHASES AND SALES OF FOREIGN EXCHANGE .................................................................................. 8 MONEY AND CREDIT.............................................................................................................................. 9 NET DOMESTIC CREDIT.......................................................................................................................... 10 MONEY SUPPLY ....................................................................................................................................... 12 CENTRAL GOVERNMENT BUDGETARY OPERATIONS ............................................................ 13
7.1 REVENUES AND EXPENDITURES ................................................................................................................. 13 7.2 GOVERNMENT INTEREST PAYMENTS .................................................................................................... 15 7.3 FINANCING ............................................................................................................................................... 15 8.0 8.1 8.2 8.3 8.4 8.5 9.0 9.1 9.2
MONEY MARKETS................................................................................................................................. 15 TREASURY BILL (T-BILL) PRIMARY MARKET ...................................................................................... 15 TREASURY BILLS STOCKS ...................................................................................................................... 16 INTER-BANK MONEY MARKET .............................................................................................................. 16 OPEN MARKET OPERATIONS ................................................................................................................. 16 SECONDARY MONEY MARKET ............................................................................................................... 17 REAL SECTOR INDICATORS .............................................................................................................. 17 TEA ........................................................................................................................................................... 17 SUGAR ...................................................................................................................................................... 17
ANNEX TABLE 1: SELECTED ANNUAL ECONOMIC INDICATORS .................................................... 19 ANNEX TABLE 2: NATIONAL COMPOSITE PRICE INDEX (2000 = 100).............................................. 21 ANNEX TABLE 3: SELECTED FOREIGN EXCHANGE RATES............................................................... 22
1
Monthly Economic Review
January, 2003
General Notes The Monthly Economic Review is published by the Research and Statistics Department, Reserve Bank of Malawi, P.O. Box 30063, Capital City, Lilongwe 3. Any opinions expressed in this Review should be regarded as solely those of the Research and Statistics Department, and as such, queries should be forwarded to the Director, Research and Statistics.
2
Monthly Economic Review
1.0
HIGHLIGHTS
1.1
Inflation
January, 2003
Overall inflation decelerated to 10.7 percent in January 2003 from 11.5 percent in December 2002. Month-on-month inflation increased by 4.8 percent compared to 1.5 percent in December. Food inflation rose by 0.5 percentage points to 8.7 percent in January, while non-food inflation on the other hand slowed down further to 13.3 percent from 15.9 percent in December. 1.2
Exchange Rates
With tight foreign exchange situation in the country the Kwacha continued to come under pressure during the month of January. 1.3
Interest Rates
The bank rate and the commercial banks’ lending and savings rates remained unchanged at December levels. However, slight movements were noticed on the money market rates. 1.4
Gross Reserves
Total gross reserves during the month of January declined to K16,715.7 million (US$188.08 million) from K18,410.9 million (US$211.3 million) in December. The outlook for reserves in the coming few months continues to be bleak with the ongoing lean period and also as donor expectations keep being scaled down. 1.5
Money Supply
Contractionary developments in the broad money aggregates were predominant a month into the New Year. This outcome notwithstanding, developments in the monetary sector remained well below expectations.
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Monthly Economic Review
2.0
January, 2003
DOMESTIC INFLATION
Consumer price inflation decelerated to 10.7 percent in January 2003 from 11.5 percent in December 2002. This slow down was mainly attributed to the deceleration in non-food inflation from 15.9 percent in December to 13.3 percent in January. Month-on-month inflation increased by 4.8 percent compared to 1.5 percent in December. This is a normal seasonal pattern. Food inflation accelerated from 8.2 percent in December to 8.7 percent in January, following a normal seasonal pattern where food prices especially for cereals rise during this time of year. Upward pressures on food inflation also emanated from imported food components due to effects of the kwacha depreciation. In contrast, non-food inflation dropped to 13.3 percent from 15.9 percent, due to declines in the costs associated with all categories in the non-food basket except for the household operations category. The household operation index rose from 18.6 percent to 21.1 percent in response to increases in the prices of non-durable household commodities. Inflation for the month of February 2003 is projected to fall within the range of 10.6 percent and 11.3 percent.
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Monthly Economic Review
January, 2003
Chart 1:
25
Twelve month inflation rates Overall inflation Food Inflation Non-food inflation
20
15
10
5
Jan-03
Dec-02
Nov-02
Oct-02
Sep-02
Aug-02
Jul-02
Jun-02
May-02
Apr-02
Mar-02
Feb-02
Jan-02
0
Table 1: Percentage changes in the weighted National Consumer Price Index –2002-03 (Base Year 2000) 2002 January February March April May June July August September October November December
Year -on-year
Month-on- month
15.5 16.2 17.2 16.1 15.4 15.6 14.5 15.1 15.4 12.9 12.0 11.5
5.6 2.9 -0.4 -1.8 -1.1 -3.1 -0.2 0.4 5.6 -0.2 2.2 1.5
2003 January 10.7 Source: National Statistical Office
3.0
4.8
EXCHANGE RATES
The local currency appears to have made a hard landing in 2003 as evidenced by the kwacha’s weak performance in January. Tight foreign exchange situation owing to non5
Monthly Economic Review
January, 2003
receipt of donor inflows was the key reason for the kwacha’s continued poor performance. The Malawi kwacha therefore, depreciated by 2.4 percent against the US dollar as at the end of January.
When viewed against the Euro, the kwacha traded at K96.48 per Euro from a position of K91.36 per Euro as the year was closing, representing 5.6 percent depreciation. The kwacha has been loosing ground against the euro even though the latter has not yet, on average, exhibited any particular strength against the major currencies since its launch. In a similar manner the kwacha also lost ground by 5.6 percent to the pound hitting a low of K147.48 to the pound as at end January.
In the sub region, the South African rand continued to gain value against the weaker US dollar. Subsequently, the local unit fell by 3.2 percent against the South African rand to close the month at K10.43 per rand. In Zimbabwe tighter foreign exchange controls imposed by the government (as the year 2002 was ending the government had closed all foreign exchange bureaux) led to an even highly overvalued Zimbabwe dollar. Hence the dollar continued to firm up against the kwacha, the latter losing by 2.3 percent as at end January. Chart 2: Malawi kwacha exchange rate
150 140 130 120 110 100 90 80 70 60 50 40 30 20
12 11 10 9 8 7 6 5
6
Jan-03
Dec-02
Nov-02
Oct-02
US dollar Pound Rand(right Scale)
Sep-02
Aug-02
Jul-02
Jun-02
May-02
Apr-02
Mar-02
Feb-02
Jan-02
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Monthly Economic Review
4.0
January, 2003
INTEREST RATES
The bank rate and the commercial banks’ lending and savings rates remained constant at December levels of 40.0 percent, 43.25 percent and 21.75 percent, respectively. Slight movements were noticed on the money market rates. Yields on the 91 days Treasury bills (TBs) rose by 1.38 percentage points to 37.43 percent while yields on the 182 days rose by 0.9 percentage points to 38.10 percent. Yields of the longest tenor, the 271 days Treasury bill however, took a slight downturn of 0.1 percentage points to 38.44 percent. In the RBM bill market, the 63 days tenor rose by 0.2 percentage points to 37.01 percent while the 91 days tenor rose by some 0.02 percentage points to 37.04 percent.
Table 2: Malawi: Interest Rate Structure1 2002
2003
June
July
Aug
Sept
Oct
Nov
Dec
Jan
Bank Rate Base rate
46.80 46.00
43.00 46.00
43.00 44.00
43.00 44.00
40.00 43.25
40.00 43.25
40.00 43.25
40.00 43.25
Savings Inter-bank Rate
26.00 35.0038.00 44.61 43.05 44.27
26.00 32.0047.80 43.10 40.48 43.03
22.50 28.0044.00 40.92 38.70 41.20
22.50 36.0044.00 40.58 37.52 41.08
21.75 32.0043.00 40.28 38.27 39.85
21.75 28.0036.60 38.10 36.88 37.45
21.75 30.0040.00 36.52 36.05 37.20
21.75 30.00 40.00 37.99 37.43 38.10
45.04
44.01
41.60
41.70
39.23
38.46
38.58
38.44
RBMYield 63 Days
44.90 44.44
43.37 42.56
40.32 40.30
40.21 40.47
39.66 38.64
37.00 36.10
35.92 36.79
37.20 37.01
91 Days
43.87
42.49
40.1
40.27
38.76
37.22
37.02
37.04
Bond Rate*
39.50
39.50
39.50
39.50
39.50
39.50
39.50
39.50
Mortgage rate (min)**
35.50
35.50
35.50
35.50
33.20
31.50
31.50
31.50
TB Yield2 91 Days 182 Days 271 Days 2
Source:
Reserve Bank of Malawi. 1 End period average 2 Weighted average yield *The quoted bond rate reflects the highest rate on Government of Malawi Local Registered Stocks (LRS) ** Owner occupied
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Monthly Economic Review
January, 2003
5.0 GROSS FOREIGN RESERVES After a robust performance of K18,410.9 million (US$211.3million) in December, total gross reserves declined to K16,715.7 million (US$188.08 million) during the month under review, and this was equivalent to 3.0 months worth of imports. Developments in both the official and commercial bank accounts contributed to this outcome. Gross official reserves went down by K769.3 million from K14,114.5 million (US$169.0 million) as at the close of 2002, mainly on account of debt service payments and sales of foreign exchange onto the market. Commercial banks reserves also registered a decline from K4,296.4 million (US$49.3 million) to K3,370.5 million (US$ 33.78 million) and this is seasonal during this period. The outlook for reserves in the coming few months continue to be bleak with the ongoing lean period and also as donor inflows keep being scaled down.
5.1
Purchases and Sales of Foreign Exchange
During the review month, total outflows more than outweighed total inflows. On the inflows, interest earned increased by about K4.7 million to K26.4 million in January. On the other hand, government project funds declined by K51.6 million to K234.0 million. Outflows comprised of debt service payments worth K437.52 million, foreign mission payments amounting to K156.4 million and maize payments to the tune of K569.4 million. There was less activity in the market by the Reserve Bank in the review month since no foreign exchange was bought from the market as compared to K435.00 million (US$5 million) in December. At the same time only a total of K533.81 million (US$6.1 million) was sold to the market while in the preceding month there was an outlay of foreign exchange amounting to K1,7734 million(US$20.5 million).
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Monthly Economic Review
6.0
January, 2003
MONEY AND CREDIT
Money supply (M2) at K26,302.7 million dropped by 3.3 percent from the levels attained at the close of 2002. The contraction in money supply was triggered by net international reserves, which registered a record dip of 43.7 percent in January against a decline of 24.0 percent in the preceding month. Net domestic credit to the government sector however rose by 5.3, percent partly countering the drop in money. On annual basis, growth in money supply accelerated to 31.2 percent from 25.2 percent in December due to an expansion of 193.0 percent in net domestic credit to government. Both net foreign assets and other assets (net) however contracted rapidly.
Table 3: Money Supply and its sources (MK’mn). 2002 June
July
Money 23,983.9 25,860.9 Supply M2 M2 Growth 8.6 17.5 rate (annual) M2 Growth 0.5 7.8 rate (monthly) Narrow 12,791.7 13,509.8 money M1 Quasi-money 11,192.2 12,351.1 Net Foreign 13,390.9 14,501.8 Assets Net Domestic Assets Net Domestic 12,839.4 14,020.3 Credit Government 5,539.7 6,731.2 (Net) Private Sector 6,837.9 6,981.1 Other Pub. 461.7 307.9 Sector (net) Other Items -2,246.4 -2,661.2 (Net) Source: Reserve Bank of Malawi.
2003
Aug
Sep
Oct
Nov
Dec
Jan
25,881.0
25,402.1
25,269.5
26,198.4
27,210.4
26,302.7
15.9
21.1
24.9
32.3
25.2
31.2
0.1
-1.9
-0.5
3.7
3.9
-3.3
13,732.7
13213.3
12,766.4
13,298.7
13,440.0
13,312.1
12,148.3 13,787.4
12,188.8 11,735.6
12,503.1 9,122.4
12,899.7 6,220.0
13,770.4 4,725.9
12,990.6 2,662.4
15,253.9
16,286.1
18,852.6
21,663.3
22,868.5
23,609.2
7,801.5
9,311.0
12,042.1
14,598.7
15,711.2
16,542.4
7,130.4 322.0
6,916.4 58.7
7,093.0 -282.5
7,163.7 -99.1
7,363.5 -206.2
7,396.5 -329.6
-3,160.3
-2,619.6
-2,705.5
-1,685.2
-384.0
31.0
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Monthly Economic Review
January, 2003
Chart 3: Determinants of Monetary Growth (K' million) 30,000.0 25,000.0 20,000.0 15,000.0 10,000.0 5,000.0 0.0
other item (net)
Jan-03
Dec-02
Net domestic credit
Nov-02
6.1
Oct-02
NFA
Sep-02
Aug-02
Jul-02
Jun-02
May-02
(10,000.0)
Apr-02
(5,000.0)
M2
Net Domestic Credit
Total domestic credit extended by the monetary authorities and the other depository corporations amounted to K23,609.2 million in January. This reflected a monthly increase of 3.2 percent (K740.7 million) compared to 5.6 percent (K1,205.2 million) in December 2002. All sectors except net claims on the parastatals recorded increases. Net domestic credit to the government sector increased by 5.3 percent (K831.2 million) while that to the private sector rose, albeit marginally, by 0.4 percent (K33.0 million). Net credit to the statutory bodies however rose to negative K329.6 million from negative K206.2 million.
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Monthly Economic Review
January, 2003
Chart 3. Total Net Domestic Credit (K' million) 16,000.0 14,000.0
Net Credit to Government
Net Credit to Statutory Bodies
12,000.0 10,000.0 8,000.0 6,000.0 4,000.0
Gross Credit to Private Sector
2,000.0 0.0
Jan-03
Nov-02
Sep-02
Jul-02
May-02
Mar-02
Jan-02
Nov-01
Sep-01
Jul-01
May-01
Mar-01
-4,000.0
Jan-01
-2,000.0
-6,000.0
Government’s position vis-à-vis the banking system continued to worsen one month into the New Year. In the absence of foreign inflows, government continued to borrow heavily from the domestic sector in order to sustain the high levels of outlays. Consequently net government borrowing from the banking system increased by K831.2 million (5.3 percent). The bulk of the increase emanated from the monetary authorities as that from the commercial banks dropped.
At K10,916.2 million, net credit to government with the monetary authorities recorded an increase of K1,164.7 million after an increase of from K1,596.4 million in the preceding month. This outcome was largely explained by extension of K2,045 million in Ways and Means Advances to government. Government recourse to Reserve Bank borrowing increased in the month to finance excess in expenditure arising from the customary recurrent budget and debt servicing. Total government resources amounted to K2,979.3 million whilst its outlays totalled K9,225.0 million creating a fiscal gap to the tune of K6,245.7 million. Central Bank holdings of Treasury bills declined by K721.5 million, partly offsetting the upsurge in the Central Bank’s claims on government.
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Monthly Economic Review
January, 2003
Government indebtedness with the other depository corporations dropped by K333.5 million (5.6 percent) to K5,626.2 million due to a reduction in uptake of securities. Commercial banks holdings of Treasury bills continued to decline and went down by K372.5 million in January compared to K393.0 million in December 2002 but were partly offset by a K23.9 million increase in government deposits by the commercial banks. Gross credit to the private sector rose by a marginal 0.4 percent (K33.0 million). These developments reveal that the private sector is still marginalized in comparison to the government sector in the share of credit, yet the situation ought to be reversed to create an environment for meaningful economic growth. Statutory corporations reduced their net indebtedness to the banking system by K123.5 million during the month. The monetary authorities net lending to the sector dropped by K137.9 million due to accumulation of deposits earmarked for Maize finance operations. On the commercial banks’ accounts, net lending to the parastatals however rose by 14.5 percent.
6.2
Money Supply
In terms of demand, the decline in the stock of money supply was explained by both quasi money and narrow money that dropped by respective amounts of K779.8 million (5.7 percent) and K128.0 million (1.0 percent). Quasi money balances dropped by K779.8 million to K12,990.6 million due to decreases in both foreign currency deposits and time and savings deposits. The decline in foreign currency denominated deposits was partly attributed to import payments as most businesses that had closed for holiday season started operations. Narrow money decreased by K128.0 million and amounted to K13,312.1 million due to a K268.6 million drop in currency in circulation as expected in the month due to reduced 12
Monthly Economic Review
January, 2003
demand for transactional money balances. That notwithstanding, demand deposits increased by K140.6 million partly offsetting the drop.
Chart 2: Money Supply & Inflation
M2 Growth
Jan-03
Dec-02
Nov-02
Oct-02
Sep-02
Aug-02
Jul-02
Jun-02
May-02
Apr-02
Mar-02
Feb-02
Jan-02
Dec-01
Nov-01
Oct-01
7.0
Inflation Rate
Sep-01
Percent 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 -10.0 -20.0 -30.0 -40.0 -50.0
Central Government Budgetary Operations
The overall central government budgetary performance was characterised by the worsening of the budget deficit from K4,686.9 million in December 2002 to K6,245.7 million in the month of January, 2003. This development emanated from a drop in total revenues coupled with an upsurge in total expenditures. The dry spell in the donor inflows forced the government to finance its cash budget deficit through domestic resources.
7.1
Revenues and Expenditures
Total revenues amounted to K2,979.3 million in January 2003, representing a slight increase of K71.7 million from K2,907.6, million recorded in December 2002. This increase was manifested in the domestic revenues in which receipts from the Malawi Revenue Authority (MRA) amounted to K2,375.4 million, some K422.8 million higher 13
Monthly Economic Review
January, 2003
than the amount of K1,952.6 million recorded in the previous month. However, deposits earmarked for development projects declined by K310.3 million from K794.0 million in December to K483.7 million in January 2003. This development reflected the slow down of the government project activities during the month under cover. During the month of January 2003, total expenditures amounted to K8,998.9 million1, an increase of K1,432.6 million from K7,566.4 million recorded in the month of December 2002. This development emanated from both recurrent and development expenditures. Reimbursements to Commercial Bank of Malawi rose by K111.1 million and amounted to K661.8 million in January from K550.7 million in December. On the other hand, reimbursements to National Bank of Malawi declined by K318.7 million from K1,635.9 million to K1,317.3 million in January. The external debt principal stood at K237.6 million in January, an increase of K145.8 million from K91.8 million recorded in December. On maturity of Treasury Bills, K2,866.0 million was repaid compared to K2,182.6 million in December.
Table 4: Central Government Budgetary Operations (MK’Mn) 1 2
2002 Jul
2003
Aug S Sept
O Oct
N Nov
D Dec
J Jan
Total Revenues
3,161.9
2,726.0
3,927.7
3,050.2
2,609.1
2,907.6
2,979.3
Of which Domestic Revenue
3,161.9
2725.8
3,927.7
3,050.2
2,609.1
2,907.6
2,375.4
Foreign Loans and grants
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Total Expenditures Overall Balance
7,247.3 -4,185.4
7,466.9 -4,740.9
7,068.7 -3,141.0
9,707.8 -6,657.6
9,185.8 -6,637.8
7,594.5 -4,686.9
8,998.9 -6,245.7
Source: Ministry of Finance. 1
Cash Budget Figures
1 Total expenditures exclude reversals amounting to K226.1 million in January and K28.2 million in
December
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Monthly Economic Review
7.2
January, 2003
Government Interest Payments
Interest payments on Local Registered Stocks and Treasury bills amounted to K606.3 million and K529.1 million, representing increases of K89.1 million and K525.3 million compared to K517.2 million and K3.7 million recorded in December, respectively. Interest charges on foreign debt amounted to K135.0 million, some K67.9 million higher than K67.1 million recorded in the previous month. However, interest payments on Ways and Means Advances experienced a drop of K83.6 million, from K199.1 million in December to K115.6 million in January.
7.3
Financing
As alluded to earlier on, the overall cash budget deficit for the month of January amounted to K6,245.7 million, some K1,558.8 million higher than K4,686.9 million registered in preceding month. The incurred cash budget deficit was financed through Ways and Means Advances and proceeds from Treasury Bills amounting to K3.346.1 million and K2,601.6 million, respectively.
8.0
MONEY MARKETS
8.1
Treasury Bill (T-bill) Primary Market
There was a 28 percent (or about K700 million) month-on-month increase in total subscriptions which amounted to about K3,300 million. This was largely a result of a 50 percent (or about K2,000 million) increase in maturities. Although by a relatively smaller percentage (i.e. 15 percent) total allotments also increased from K2,545 million recorded in the preceding month to K2,934 million. Accordingly the all-type T-bill yield gained some 32 basis points month-on-month and closed the review month at 37.68 percent.
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Monthly Economic Review
8.2
January, 2003
Treasury Bills Stocks
Notwithstanding the increase in allotments, the stock of T-bills dropped by about 2 percent month-on-month and amounted to K28,457.7 million. The drop in the outstanding stock was largely due to maturity of T-bills (about K1,348 million) that were converted from part of outstanding Ways and Means Advances which were held by the Reserve Bank. In terms of category holdings, the Reserve Bank and the non-bank sector continued to dominate as they held 36 and 37 percent of the total outstanding stock respectively. The rest was held by commercial banks (19 percent) and discount houses (8 percent).
8.3
Inter-bank Money Market
In response to the increase in maturities as alluded to elsewhere in this report, inter-bank borrowing dropped from K9,042 million recorded in the preceding month to K3,773 million. Consequently, the interbank rate closed the review month at 33.75 percent, constituting a month-on-month decline of 317 basis points. The supply of funds on the inter-bank market was however outweighed by its demand as commercial banks borrowed an extra K460 million from Reserve Bank’s Standing Facilities window to meet the shortfall. 8.4
Open Market Operations
Open market operations remained contractionary during January 2003 as evidenced by a net withdrawal of K550 million from the economy. A total of K4,326 million was injected through RBM bill maturities. Against this injection, K4,876 million was withdrawn through RBM bill issues and OMO T-bill sales. Notwithstanding these intensive open market operations, the RBM bill yield lost 214 basis points, closing the review month at 36.56 percent. The drop in the yield was largely a reflection of the Reserve Bank’s deliberate effort to bring yields in line with the inflation which stood at 10.7 percent as at end January 2003.
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Monthly Economic Review
8.5
January, 2003
Secondary Money Market
Secondary money market transactions amounted to K1,700 million, a decrease of about K600 million on the preceding month. Almost all transactions (K1,697 million) involved T-bill repo transactions conducted by discount houses.
9.0
REAL SECTOR INDICATORS
9.1
Tea
Tea production in 2002 amounted to 39.2 million kilograms, a 6.6 percent increase on the 36.7 million kilograms produced in 2001.
Estimates indicate that production may
improve further to 41.0 million kilograms in 2002. Climatic changes remain a major factor that affects production of tea in Malawi. A total of 6.7 million kilograms of tea were produced in January 2003, compared to 5.3 million kilograms produced in a similar month of 2002 and representing a 27 percent increase. In January 2003, 1.6 million kilograms of tea were sold which was a 24.5 percent drop on the 2.2 million kilograms sold in a comparable month of 2002. Tea sales are expected to pick up this season due to slightly higher demand for tea. Tea prices slightly picked up during the month averaging US$0.88/kg, a 2.3 percent increase on the US$0.86/kg fetched in January 2002. A total of US$1.4 million realized in January, 22.8 percent below US$1.9 million realized in a similar month of 2002.
9.2
Sugar
Production estimates indicate that a total of 248,703 tonnes of sugar will be produced in the year 2003 compared to 260,617 tonnes produced in 2002, indicating a 4.6 percent drop in production. 2002 was an exceptional year for the sugar growing industry, with very good weather for the crop. However, the estimate for 2003 indicates a normal year for the industry. During the month of January 2003 no sugar was produced. Normally ILLOVO does not produce any sugar during the first 3 months of the year. 17
Monthly Economic Review
January, 2003
A total of 14,189 tonnes of sugar (valued at K403.5 million), were exported during January 2003. These were down by 47 percent when compared to the 26,773 tonnes (valued at K692.3 million) sold in a similar period of 2002. The decline in exports volume was due to a decline in demand in regional markets. The average price fetched during the month of January was K28, 437 per tonne compared to K25,859 per tonne fetched in a comparable month of 2002. The increase in the average price was due to price negotiations.
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Monthly Economic Review
January, 2003
Annex Table 1: Selected Annual Economic Indicators 1997
1998
1999
2000
2001
2002
Population (million) Population growth rate (%)
9.6 1.9
9.8 1.9
10.0 1.9
10.1 1.9
10.4 1.9
10.61 1.91
National Income GDP at 1994 Factor cost (K’mn)
12,511.6
12,644.6
13,092
13,197.3
12,976.2
12,585.4
GDP at current market prices (K’mn) Real GDP growth (%) GDP per capita (K)
46,264.5
54,792.2
79,822.8
104,110.3
127,600.2
137,773.9
7.0 4,812.3
2.2 5,591.0
3.6 7,993.3
2.0 10,231.1
-1.6 12,305.6
0.1 12,997.5
Consumer Price Index (CPI) Annualized inflation rate (%) Government Budget (K’mn)2 Total Revenue Revenues Grants Total Expenditure Recurrent Development Deficit/GDP ratio (before grants) Deficit/GDP ratio (after grants)
41.1 9.2
53.3 29.8
77.1 44.7
100.0 29.6
122.7 20.2
145.4 10.72
7,652.5 6,311.9 1,340.6 10,073.8 8,125.4 1,948.4 -8.9 -5.7
12,009.8 8,899.8 3,110.0 12,127.0 8,663.1 3,463.9 -6.2 -0.2
19,126.4 14,444.1 4,682.3 21,655.4 14,995.7 6,659.7 -8.8 -3.1
26,279 17,815 8,464 29,812 22,989 6,823 -11.0 -3.2
28,512.6 22,853.2 5,659.4 30,476.3 26,414.0 3,017.1 -5.8 -1.5
37,548.72 24,874.07 12,674.65 44,157.32 32,594.62 11,562.70 -9.7 -3.3
Money and Credit (K’mn) 3 Net Foreign Assets Net Domestic Credit Government Statutory bodies Private (gross) Money Supply (M2) M2 Growth Rate (annual)
1,788.0 3,082.3 1,235.2 243.8 1,603.3 5,555.4 2.2
7,627.5 2,450.5 -425.3 -310.4 3,186.2 8,641.2 55.5
8,848.3 3,978.3 -675.7 1,288.7 3,365.3 11,545.6 33.6
14,252.4 6,208.1 117.3 1,047.1 5,043.7 16,444.2 42.4
11,776.4 11,223.5 5,979.2 -44.8 5,289.1 18,437.9 12.1
2,662.4 23,609.2 16,542.4 -329.6 7,396.5 26,302.7 31.0
1 January, 2003 Year-on-Year inflation (2000=100) 2These are annual projection figures
3Figures from 2002 are for four commercial banks( National Bank of Malawi, Commercial Bank of
Malawi, First Merchant Bank and Finance Bank of Malawi.) 19
Monthly Economic Review
January, 2003
Annex Table 1: Selected Annual Economic Indicators Contd: Balance of Payments (K’mn) Current Account Balance
1997
1998
1999
2000
2001
2002
-5,778.8
-4,395.3
-11,981.4
-4,202.1
-12,386.3
Exports (fob) Imports (fob) Trade Balance Services (net) Private Transfers (net) Capital Account Current account balance (GDP) Total Foreign Reserves (K’mn)
8,483.0 11,254.6 -2,771.6 -2,859.8 -147.0 3,591.6 -13.3 4,035.8
16,734.8 15,442.5 1,292.3 -5,229.3 -458.4 9,840.1 -7.7 13,428.8
13,103.6 19,712.5 25,240.8 -5,528.2 -7,966.4 391.0 10,651.7 -16.7 12,873.5
23,925.1 27,414.2 -3,489.0 -8,959.4 467.0 14,469.4 -19.4 22,463.8
30,121.9 26,214.2 3,907.8 -9,225.9 1,116.1 4,034.6 -12.0 18,785.5
32,381.4 34,106.1 -1,724.6 -11,898.3 1,236.7 6,509.8 .. 20,164.8
Official (gross) Commercial Banks (net) Import cover
3,378.5 657.3 3.1
11,399.3 2,029.5 5.4
11,422.3 1,451.2 5.0
19,500.3 2,963.5 4.7
13,664.2 5,121.3 4.4
15,677.1 4,600.9 3.3
External Debt External debt/GDP
120.4
132.2
129.4
197.6
191.4
92.3
Debt Service Ratio Exchange rate
15.2
18.2
17.7
20.8
20.1
16.7*
End Period MK/US Dollar Average Mk/US Dollar
21.1623 16.4449
43.8836 31.0727
46.4377 44.0880
80.0760 80.0946
68.8138 72.1509
89.65774 876.55274
* Debt Service takes account of debt relief
4 January end period and monthly average exchange rates
20
Monthly Economic Review
January, 2003
Annex Table 2: National Composite Price Index (2000 = 100) Period
All items
Bev & Tobacco 5.9
Cloth & Footwear 8.5
Housing
100.0
Food Costs 58.1
Overall Weight 2001 2001 Jan Feb Mar Apr May Jun July Aug Sept Oct Nov Dec 2002 Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec 2003 Jan
12.1
House hold ops 4.1
Transport ation 5.1
Miscella neous 6.2
122.7
117.6
131.0
130.5
132.9
129.7
122.1
129.8
121.0 123.8 122.3 121.2 120.6 116.7 117.6 117.4 123.6 126.0 129.8 132.4
118.1 121.6 118.1 115.4 113.4 106.3 108.2 107.5 118.4 123.3 128.5 132.4
129.2 130.0 131.6 133.5 133.8 133.8 130.6 130.2 130.3 130.1 130.1 129.3
122.5 125.3 128.2 128.4 130.3 130.4 130.7 130.5 134.0 133.6 134.5 137.1
128.2 130.9 131.0 132.6 134.8 135.0 132.7 135.0 132.1 130.1 135.2 137.3
125.5 126.9 127.2 129.1 129.6 129.4 135.5 134.6 130.2 127.6 128.5 127.4
125.4 126.0 127.5 129.2 129.2 130.9 130.9 131.5 132.1 131.0 132.0 130.3
118.1 119.6 120.3 122.1 122.1 122.2 122.4 122.9 123.4 123.8 123.8 124.9
139.8 143.9 143.3 140.7 139.2 134.9 134.6 135.1 142.7 142.3 145.4 147.6
141.4 146.6 144.1 138.1 135.0 127.6 123.8 124.4 136.7 135.8 139.9 143.3
131.0 131.5 131.4 135.0 135.0 135.0 136.5 138.3 138.3 139.9 143.5 145.4
147.3 148.8 150.0 147.7 148.5 148.8 155.6 166.8 166.5 156.6 158.2 158.5
141.1 146.1 148.9 153.4 153.6 153.5 162.2 162.4 164.4 163.6 165.3 164.4
128.2 130.9 142.1 145.6 145.9 148.0 146.0 146.1 146.3 147.8 149.9 151.1
138.4 139.6 139.4 140.9 141.8 142.1 145.4 145.6 146.1 147.2 149.8 150.8
129.7 131.9 132.0 133.7 134.2 134.2 135.1 135.1 135.5 136.3 137.0 137.5
154.7
153.7
147.0
159.4
168.5
155.2
153.5
139.0
21
Monthly Economic Review
January, 2003
ANNEX TABLE 3: SELECTED FOREIGN EXCHANGE RATES Date Pound Sterling Malawi kwacha Per Pound
U.S Dollar
Euro
Japanese Yen S. A. Rand
Malawi kwacha Malawi kwacha Malawi kwacha Per Dollar Per Euro Per Yen
Malawi kwacha Per Rand
Zimbabwe Dollar Malawi kwacha Per Zim. Dollar Buying Selling 1.1486 1.1545 1.3257 1.3327 1.3061 1.3191
Buying Selling Buying Selling Buying Selling Buying 1999 70.9693 71.6770 43.8676 44.3084 46.7813 47.2362 0.3875 2000 89.0173 89.9158 59.2477 59.8383 54.1345 54.6847 0.5491 2001 103.4436 104.4832 71.8383 72.5563 64.3735 65.0180 0.5919
Selling 0.3914 0.5557 0.5981
Buying 7.1853 8.4586 8.5278
Selling 7.2573 8.5436 8.6137
2001 Jan 117.8587 119.0432 79.7061 80.5072 74.8004 75.5522 0.6835 Feb 115.6011 116.7629 79.5101 80.3092 73.3696 74.1070 0.6843 Mar 113.9481 115.0933 78.8915 79.6843 71.7314 72.4523 0.6508 Apr 112.0262 113.1520 78.0507 78.8351 69.5744 70.2736 0.6302 May 107.4833 108.5633 75.4533 76.2117 64.3315 64.9781 0.6335 June 103.9552 105.0000 73.8056 74.5474 62.4026 63.0298 0.5957 July 97.7748 98.7574 68.4697 69.1579 59.9179 60.5201 0.5491 Aug 95.0672 96.0226 65.1190 65.7734 59.9179 60.4589 0.5485 Sept 90.3587 91.2669 61.4267 62.0441 56.1809 56.7455 0.5149 Oct 90.8136 91.7262 62.4835 63.1115 56.6601 57.2295 0.5103 Nov 95.3615 96.3199 66.9862 67.6594 59.3833 59.9801 0.5405
0.6903 0.6912 0.6573 0.6365 0.6399 0.6017 0.5546 0.5540 0.5201 05155 0.5459
10.2782 10.1880 10.0095 9.7777 9.4328 9.1627 8.3322 7.7708 6.8511 6.6472 6.5257
10.3815 1.4490 10.2904 1.4467 10.1101 1.4317 9.8760 1.4204 9.5276 1.3731 9.2548 1.3431 8.4159 1.2449 7.8489 1.1840 6.9199 1.1168 6.7140 1.1361 6.5913 1.2190
1.4636 1.4612 1.4461 1.4347 1.3869 1.3566 1.2574 1.1959 1.1281 1.1475 1.2131
Dec 97.1488 98.1252 66.9576 67.6306 59.2642 59.8598 0.5100 0.5151 5.5891 5.6453 1.2185 1.2308 2002 Jan 95.5955 96.5563 67.5921 68.2715 58.2779 58.8637 0.5091 0.5142 Feb 102.6115 103.6427 72.3482 73.0754 62.5306 63.1590 0.5401 0.5455 Mar 106.1748 107.2418 74.4303 75.1783 65.0297 65.6833 0.5614 0.5671 Apr 110.0057 111.1113 75.4756 76.2342 68.1621 68.8471 0.58.97 0.5957 May 110.7470 111.8600 75.5076 76.2664 70.9318 71.6446 0.6133 0.6195 June 116.3924 117.5622 76.2279 76.9941 75.2979 76.0547 0.6381 0.6445 July 118.2779 119.4667 75.2404 75.9966 73.9989 74.7427 0.6289 0.6352 Aug 118.1907 119.3738 76.3555 77.1229 75.2178 75.9738 0.6478 0.6543 Sep 125.1898 126.4480 79.9169 80.7201 78.6143 79.0093 0.6574 0.6640 Oct 124.9426 126.1984 80.0914 80.8964 79.0903 79.8851 0.6532 0.6598 Nov 127.6287 128.9113 82.3092 83.1364 81.7083 82.5295 0.6732 0.6800 Dec 139.0285 140.4257 86.7031 87.5745 90.8995 91.8131 0.7314 0.7387 2003 Jan 146.7472 148.2220 88.7655 89.6577 95.9999 96.9647 0.7459 0.7534
22
5.9291 6.3463 6.5290 7.1541 7.8084 7.3686 7.4348 7.1949 7.5822 7.9416 8.8887 10.0642
5.9887 1.2301 6.4101 1.3166 6.5946 1.3545 7.2260 1.3735 7.8869 1.3729 7.4426 1.3872 7.5095 1.3693 7.2672 1.3895 7.6585 1.4590 8.0215 1.4575 8.9334 1.5103 10.1654 1.5779
1.2424 1.3299 1.3681 1.3873 1.3867 1.4012 1.3830 1.4035 1.4690 1.4722 1.5254 1.5937
10.3819 10.4863 1.6154 1.6316
1.0 1.1 1.2 1.3 1.4 1.5
January, 2003
HIGHLIGHTS ............................................................................................................................................. 3 INFLATION .................................................................................................................................................. 3 EXCHANGE RATES ...................................................................................................................................... 3 INTEREST RATES ......................................................................................................................................... 3 GROSS RESERVES ....................................................................................................................................... 3 MONEY SUPPLY ......................................................................................................................................... 3
2.0
DOMESTIC INFLATION......................................................................................................................... 4
3.0
EXCHANGE RATES .................................................................................................................................. 5
4.0
INTEREST RATES..................................................................................................................................... 7
5.0 GROSS FOREIGN RESERVES..................................................................................................................... 8 5.1 6.0 6.1 6.2 7.0
PURCHASES AND SALES OF FOREIGN EXCHANGE .................................................................................. 8 MONEY AND CREDIT.............................................................................................................................. 9 NET DOMESTIC CREDIT.......................................................................................................................... 10 MONEY SUPPLY ....................................................................................................................................... 12 CENTRAL GOVERNMENT BUDGETARY OPERATIONS ............................................................ 13
7.1 REVENUES AND EXPENDITURES ................................................................................................................. 13 7.2 GOVERNMENT INTEREST PAYMENTS .................................................................................................... 15 7.3 FINANCING ............................................................................................................................................... 15 8.0 8.1 8.2 8.3 8.4 8.5 9.0 9.1 9.2
MONEY MARKETS................................................................................................................................. 15 TREASURY BILL (T-BILL) PRIMARY MARKET ...................................................................................... 15 TREASURY BILLS STOCKS ...................................................................................................................... 16 INTER-BANK MONEY MARKET .............................................................................................................. 16 OPEN MARKET OPERATIONS ................................................................................................................. 16 SECONDARY MONEY MARKET ............................................................................................................... 17 REAL SECTOR INDICATORS .............................................................................................................. 17 TEA ........................................................................................................................................................... 17 SUGAR ...................................................................................................................................................... 17
ANNEX TABLE 1: SELECTED ANNUAL ECONOMIC INDICATORS .................................................... 19 ANNEX TABLE 2: NATIONAL COMPOSITE PRICE INDEX (2000 = 100).............................................. 21 ANNEX TABLE 3: SELECTED FOREIGN EXCHANGE RATES............................................................... 22
1
Monthly Economic Review
January, 2003
General Notes The Monthly Economic Review is published by the Research and Statistics Department, Reserve Bank of Malawi, P.O. Box 30063, Capital City, Lilongwe 3. Any opinions expressed in this Review should be regarded as solely those of the Research and Statistics Department, and as such, queries should be forwarded to the Director, Research and Statistics.
2
Monthly Economic Review
1.0
HIGHLIGHTS
1.1
Inflation
January, 2003
Overall inflation decelerated to 10.7 percent in January 2003 from 11.5 percent in December 2002. Month-on-month inflation increased by 4.8 percent compared to 1.5 percent in December. Food inflation rose by 0.5 percentage points to 8.7 percent in January, while non-food inflation on the other hand slowed down further to 13.3 percent from 15.9 percent in December. 1.2
Exchange Rates
With tight foreign exchange situation in the country the Kwacha continued to come under pressure during the month of January. 1.3
Interest Rates
The bank rate and the commercial banks’ lending and savings rates remained unchanged at December levels. However, slight movements were noticed on the money market rates. 1.4
Gross Reserves
Total gross reserves during the month of January declined to K16,715.7 million (US$188.08 million) from K18,410.9 million (US$211.3 million) in December. The outlook for reserves in the coming few months continues to be bleak with the ongoing lean period and also as donor expectations keep being scaled down. 1.5
Money Supply
Contractionary developments in the broad money aggregates were predominant a month into the New Year. This outcome notwithstanding, developments in the monetary sector remained well below expectations.
3
Monthly Economic Review
2.0
January, 2003
DOMESTIC INFLATION
Consumer price inflation decelerated to 10.7 percent in January 2003 from 11.5 percent in December 2002. This slow down was mainly attributed to the deceleration in non-food inflation from 15.9 percent in December to 13.3 percent in January. Month-on-month inflation increased by 4.8 percent compared to 1.5 percent in December. This is a normal seasonal pattern. Food inflation accelerated from 8.2 percent in December to 8.7 percent in January, following a normal seasonal pattern where food prices especially for cereals rise during this time of year. Upward pressures on food inflation also emanated from imported food components due to effects of the kwacha depreciation. In contrast, non-food inflation dropped to 13.3 percent from 15.9 percent, due to declines in the costs associated with all categories in the non-food basket except for the household operations category. The household operation index rose from 18.6 percent to 21.1 percent in response to increases in the prices of non-durable household commodities. Inflation for the month of February 2003 is projected to fall within the range of 10.6 percent and 11.3 percent.
4
Monthly Economic Review
January, 2003
Chart 1:
25
Twelve month inflation rates Overall inflation Food Inflation Non-food inflation
20
15
10
5
Jan-03
Dec-02
Nov-02
Oct-02
Sep-02
Aug-02
Jul-02
Jun-02
May-02
Apr-02
Mar-02
Feb-02
Jan-02
0
Table 1: Percentage changes in the weighted National Consumer Price Index –2002-03 (Base Year 2000) 2002 January February March April May June July August September October November December
Year -on-year
Month-on- month
15.5 16.2 17.2 16.1 15.4 15.6 14.5 15.1 15.4 12.9 12.0 11.5
5.6 2.9 -0.4 -1.8 -1.1 -3.1 -0.2 0.4 5.6 -0.2 2.2 1.5
2003 January 10.7 Source: National Statistical Office
3.0
4.8
EXCHANGE RATES
The local currency appears to have made a hard landing in 2003 as evidenced by the kwacha’s weak performance in January. Tight foreign exchange situation owing to non5
Monthly Economic Review
January, 2003
receipt of donor inflows was the key reason for the kwacha’s continued poor performance. The Malawi kwacha therefore, depreciated by 2.4 percent against the US dollar as at the end of January.
When viewed against the Euro, the kwacha traded at K96.48 per Euro from a position of K91.36 per Euro as the year was closing, representing 5.6 percent depreciation. The kwacha has been loosing ground against the euro even though the latter has not yet, on average, exhibited any particular strength against the major currencies since its launch. In a similar manner the kwacha also lost ground by 5.6 percent to the pound hitting a low of K147.48 to the pound as at end January.
In the sub region, the South African rand continued to gain value against the weaker US dollar. Subsequently, the local unit fell by 3.2 percent against the South African rand to close the month at K10.43 per rand. In Zimbabwe tighter foreign exchange controls imposed by the government (as the year 2002 was ending the government had closed all foreign exchange bureaux) led to an even highly overvalued Zimbabwe dollar. Hence the dollar continued to firm up against the kwacha, the latter losing by 2.3 percent as at end January. Chart 2: Malawi kwacha exchange rate
150 140 130 120 110 100 90 80 70 60 50 40 30 20
12 11 10 9 8 7 6 5
6
Jan-03
Dec-02
Nov-02
Oct-02
US dollar Pound Rand(right Scale)
Sep-02
Aug-02
Jul-02
Jun-02
May-02
Apr-02
Mar-02
Feb-02
Jan-02
4
Monthly Economic Review
4.0
January, 2003
INTEREST RATES
The bank rate and the commercial banks’ lending and savings rates remained constant at December levels of 40.0 percent, 43.25 percent and 21.75 percent, respectively. Slight movements were noticed on the money market rates. Yields on the 91 days Treasury bills (TBs) rose by 1.38 percentage points to 37.43 percent while yields on the 182 days rose by 0.9 percentage points to 38.10 percent. Yields of the longest tenor, the 271 days Treasury bill however, took a slight downturn of 0.1 percentage points to 38.44 percent. In the RBM bill market, the 63 days tenor rose by 0.2 percentage points to 37.01 percent while the 91 days tenor rose by some 0.02 percentage points to 37.04 percent.
Table 2: Malawi: Interest Rate Structure1 2002
2003
June
July
Aug
Sept
Oct
Nov
Dec
Jan
Bank Rate Base rate
46.80 46.00
43.00 46.00
43.00 44.00
43.00 44.00
40.00 43.25
40.00 43.25
40.00 43.25
40.00 43.25
Savings Inter-bank Rate
26.00 35.0038.00 44.61 43.05 44.27
26.00 32.0047.80 43.10 40.48 43.03
22.50 28.0044.00 40.92 38.70 41.20
22.50 36.0044.00 40.58 37.52 41.08
21.75 32.0043.00 40.28 38.27 39.85
21.75 28.0036.60 38.10 36.88 37.45
21.75 30.0040.00 36.52 36.05 37.20
21.75 30.00 40.00 37.99 37.43 38.10
45.04
44.01
41.60
41.70
39.23
38.46
38.58
38.44
RBMYield 63 Days
44.90 44.44
43.37 42.56
40.32 40.30
40.21 40.47
39.66 38.64
37.00 36.10
35.92 36.79
37.20 37.01
91 Days
43.87
42.49
40.1
40.27
38.76
37.22
37.02
37.04
Bond Rate*
39.50
39.50
39.50
39.50
39.50
39.50
39.50
39.50
Mortgage rate (min)**
35.50
35.50
35.50
35.50
33.20
31.50
31.50
31.50
TB Yield2 91 Days 182 Days 271 Days 2
Source:
Reserve Bank of Malawi. 1 End period average 2 Weighted average yield *The quoted bond rate reflects the highest rate on Government of Malawi Local Registered Stocks (LRS) ** Owner occupied
7
Monthly Economic Review
January, 2003
5.0 GROSS FOREIGN RESERVES After a robust performance of K18,410.9 million (US$211.3million) in December, total gross reserves declined to K16,715.7 million (US$188.08 million) during the month under review, and this was equivalent to 3.0 months worth of imports. Developments in both the official and commercial bank accounts contributed to this outcome. Gross official reserves went down by K769.3 million from K14,114.5 million (US$169.0 million) as at the close of 2002, mainly on account of debt service payments and sales of foreign exchange onto the market. Commercial banks reserves also registered a decline from K4,296.4 million (US$49.3 million) to K3,370.5 million (US$ 33.78 million) and this is seasonal during this period. The outlook for reserves in the coming few months continue to be bleak with the ongoing lean period and also as donor inflows keep being scaled down.
5.1
Purchases and Sales of Foreign Exchange
During the review month, total outflows more than outweighed total inflows. On the inflows, interest earned increased by about K4.7 million to K26.4 million in January. On the other hand, government project funds declined by K51.6 million to K234.0 million. Outflows comprised of debt service payments worth K437.52 million, foreign mission payments amounting to K156.4 million and maize payments to the tune of K569.4 million. There was less activity in the market by the Reserve Bank in the review month since no foreign exchange was bought from the market as compared to K435.00 million (US$5 million) in December. At the same time only a total of K533.81 million (US$6.1 million) was sold to the market while in the preceding month there was an outlay of foreign exchange amounting to K1,7734 million(US$20.5 million).
8
Monthly Economic Review
6.0
January, 2003
MONEY AND CREDIT
Money supply (M2) at K26,302.7 million dropped by 3.3 percent from the levels attained at the close of 2002. The contraction in money supply was triggered by net international reserves, which registered a record dip of 43.7 percent in January against a decline of 24.0 percent in the preceding month. Net domestic credit to the government sector however rose by 5.3, percent partly countering the drop in money. On annual basis, growth in money supply accelerated to 31.2 percent from 25.2 percent in December due to an expansion of 193.0 percent in net domestic credit to government. Both net foreign assets and other assets (net) however contracted rapidly.
Table 3: Money Supply and its sources (MK’mn). 2002 June
July
Money 23,983.9 25,860.9 Supply M2 M2 Growth 8.6 17.5 rate (annual) M2 Growth 0.5 7.8 rate (monthly) Narrow 12,791.7 13,509.8 money M1 Quasi-money 11,192.2 12,351.1 Net Foreign 13,390.9 14,501.8 Assets Net Domestic Assets Net Domestic 12,839.4 14,020.3 Credit Government 5,539.7 6,731.2 (Net) Private Sector 6,837.9 6,981.1 Other Pub. 461.7 307.9 Sector (net) Other Items -2,246.4 -2,661.2 (Net) Source: Reserve Bank of Malawi.
2003
Aug
Sep
Oct
Nov
Dec
Jan
25,881.0
25,402.1
25,269.5
26,198.4
27,210.4
26,302.7
15.9
21.1
24.9
32.3
25.2
31.2
0.1
-1.9
-0.5
3.7
3.9
-3.3
13,732.7
13213.3
12,766.4
13,298.7
13,440.0
13,312.1
12,148.3 13,787.4
12,188.8 11,735.6
12,503.1 9,122.4
12,899.7 6,220.0
13,770.4 4,725.9
12,990.6 2,662.4
15,253.9
16,286.1
18,852.6
21,663.3
22,868.5
23,609.2
7,801.5
9,311.0
12,042.1
14,598.7
15,711.2
16,542.4
7,130.4 322.0
6,916.4 58.7
7,093.0 -282.5
7,163.7 -99.1
7,363.5 -206.2
7,396.5 -329.6
-3,160.3
-2,619.6
-2,705.5
-1,685.2
-384.0
31.0
9
Monthly Economic Review
January, 2003
Chart 3: Determinants of Monetary Growth (K' million) 30,000.0 25,000.0 20,000.0 15,000.0 10,000.0 5,000.0 0.0
other item (net)
Jan-03
Dec-02
Net domestic credit
Nov-02
6.1
Oct-02
NFA
Sep-02
Aug-02
Jul-02
Jun-02
May-02
(10,000.0)
Apr-02
(5,000.0)
M2
Net Domestic Credit
Total domestic credit extended by the monetary authorities and the other depository corporations amounted to K23,609.2 million in January. This reflected a monthly increase of 3.2 percent (K740.7 million) compared to 5.6 percent (K1,205.2 million) in December 2002. All sectors except net claims on the parastatals recorded increases. Net domestic credit to the government sector increased by 5.3 percent (K831.2 million) while that to the private sector rose, albeit marginally, by 0.4 percent (K33.0 million). Net credit to the statutory bodies however rose to negative K329.6 million from negative K206.2 million.
10
Monthly Economic Review
January, 2003
Chart 3. Total Net Domestic Credit (K' million) 16,000.0 14,000.0
Net Credit to Government
Net Credit to Statutory Bodies
12,000.0 10,000.0 8,000.0 6,000.0 4,000.0
Gross Credit to Private Sector
2,000.0 0.0
Jan-03
Nov-02
Sep-02
Jul-02
May-02
Mar-02
Jan-02
Nov-01
Sep-01
Jul-01
May-01
Mar-01
-4,000.0
Jan-01
-2,000.0
-6,000.0
Government’s position vis-à-vis the banking system continued to worsen one month into the New Year. In the absence of foreign inflows, government continued to borrow heavily from the domestic sector in order to sustain the high levels of outlays. Consequently net government borrowing from the banking system increased by K831.2 million (5.3 percent). The bulk of the increase emanated from the monetary authorities as that from the commercial banks dropped.
At K10,916.2 million, net credit to government with the monetary authorities recorded an increase of K1,164.7 million after an increase of from K1,596.4 million in the preceding month. This outcome was largely explained by extension of K2,045 million in Ways and Means Advances to government. Government recourse to Reserve Bank borrowing increased in the month to finance excess in expenditure arising from the customary recurrent budget and debt servicing. Total government resources amounted to K2,979.3 million whilst its outlays totalled K9,225.0 million creating a fiscal gap to the tune of K6,245.7 million. Central Bank holdings of Treasury bills declined by K721.5 million, partly offsetting the upsurge in the Central Bank’s claims on government.
11
Monthly Economic Review
January, 2003
Government indebtedness with the other depository corporations dropped by K333.5 million (5.6 percent) to K5,626.2 million due to a reduction in uptake of securities. Commercial banks holdings of Treasury bills continued to decline and went down by K372.5 million in January compared to K393.0 million in December 2002 but were partly offset by a K23.9 million increase in government deposits by the commercial banks. Gross credit to the private sector rose by a marginal 0.4 percent (K33.0 million). These developments reveal that the private sector is still marginalized in comparison to the government sector in the share of credit, yet the situation ought to be reversed to create an environment for meaningful economic growth. Statutory corporations reduced their net indebtedness to the banking system by K123.5 million during the month. The monetary authorities net lending to the sector dropped by K137.9 million due to accumulation of deposits earmarked for Maize finance operations. On the commercial banks’ accounts, net lending to the parastatals however rose by 14.5 percent.
6.2
Money Supply
In terms of demand, the decline in the stock of money supply was explained by both quasi money and narrow money that dropped by respective amounts of K779.8 million (5.7 percent) and K128.0 million (1.0 percent). Quasi money balances dropped by K779.8 million to K12,990.6 million due to decreases in both foreign currency deposits and time and savings deposits. The decline in foreign currency denominated deposits was partly attributed to import payments as most businesses that had closed for holiday season started operations. Narrow money decreased by K128.0 million and amounted to K13,312.1 million due to a K268.6 million drop in currency in circulation as expected in the month due to reduced 12
Monthly Economic Review
January, 2003
demand for transactional money balances. That notwithstanding, demand deposits increased by K140.6 million partly offsetting the drop.
Chart 2: Money Supply & Inflation
M2 Growth
Jan-03
Dec-02
Nov-02
Oct-02
Sep-02
Aug-02
Jul-02
Jun-02
May-02
Apr-02
Mar-02
Feb-02
Jan-02
Dec-01
Nov-01
Oct-01
7.0
Inflation Rate
Sep-01
Percent 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 -10.0 -20.0 -30.0 -40.0 -50.0
Central Government Budgetary Operations
The overall central government budgetary performance was characterised by the worsening of the budget deficit from K4,686.9 million in December 2002 to K6,245.7 million in the month of January, 2003. This development emanated from a drop in total revenues coupled with an upsurge in total expenditures. The dry spell in the donor inflows forced the government to finance its cash budget deficit through domestic resources.
7.1
Revenues and Expenditures
Total revenues amounted to K2,979.3 million in January 2003, representing a slight increase of K71.7 million from K2,907.6, million recorded in December 2002. This increase was manifested in the domestic revenues in which receipts from the Malawi Revenue Authority (MRA) amounted to K2,375.4 million, some K422.8 million higher 13
Monthly Economic Review
January, 2003
than the amount of K1,952.6 million recorded in the previous month. However, deposits earmarked for development projects declined by K310.3 million from K794.0 million in December to K483.7 million in January 2003. This development reflected the slow down of the government project activities during the month under cover. During the month of January 2003, total expenditures amounted to K8,998.9 million1, an increase of K1,432.6 million from K7,566.4 million recorded in the month of December 2002. This development emanated from both recurrent and development expenditures. Reimbursements to Commercial Bank of Malawi rose by K111.1 million and amounted to K661.8 million in January from K550.7 million in December. On the other hand, reimbursements to National Bank of Malawi declined by K318.7 million from K1,635.9 million to K1,317.3 million in January. The external debt principal stood at K237.6 million in January, an increase of K145.8 million from K91.8 million recorded in December. On maturity of Treasury Bills, K2,866.0 million was repaid compared to K2,182.6 million in December.
Table 4: Central Government Budgetary Operations (MK’Mn) 1 2
2002 Jul
2003
Aug S Sept
O Oct
N Nov
D Dec
J Jan
Total Revenues
3,161.9
2,726.0
3,927.7
3,050.2
2,609.1
2,907.6
2,979.3
Of which Domestic Revenue
3,161.9
2725.8
3,927.7
3,050.2
2,609.1
2,907.6
2,375.4
Foreign Loans and grants
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Total Expenditures Overall Balance
7,247.3 -4,185.4
7,466.9 -4,740.9
7,068.7 -3,141.0
9,707.8 -6,657.6
9,185.8 -6,637.8
7,594.5 -4,686.9
8,998.9 -6,245.7
Source: Ministry of Finance. 1
Cash Budget Figures
1 Total expenditures exclude reversals amounting to K226.1 million in January and K28.2 million in
December
14
Monthly Economic Review
7.2
January, 2003
Government Interest Payments
Interest payments on Local Registered Stocks and Treasury bills amounted to K606.3 million and K529.1 million, representing increases of K89.1 million and K525.3 million compared to K517.2 million and K3.7 million recorded in December, respectively. Interest charges on foreign debt amounted to K135.0 million, some K67.9 million higher than K67.1 million recorded in the previous month. However, interest payments on Ways and Means Advances experienced a drop of K83.6 million, from K199.1 million in December to K115.6 million in January.
7.3
Financing
As alluded to earlier on, the overall cash budget deficit for the month of January amounted to K6,245.7 million, some K1,558.8 million higher than K4,686.9 million registered in preceding month. The incurred cash budget deficit was financed through Ways and Means Advances and proceeds from Treasury Bills amounting to K3.346.1 million and K2,601.6 million, respectively.
8.0
MONEY MARKETS
8.1
Treasury Bill (T-bill) Primary Market
There was a 28 percent (or about K700 million) month-on-month increase in total subscriptions which amounted to about K3,300 million. This was largely a result of a 50 percent (or about K2,000 million) increase in maturities. Although by a relatively smaller percentage (i.e. 15 percent) total allotments also increased from K2,545 million recorded in the preceding month to K2,934 million. Accordingly the all-type T-bill yield gained some 32 basis points month-on-month and closed the review month at 37.68 percent.
15
Monthly Economic Review
8.2
January, 2003
Treasury Bills Stocks
Notwithstanding the increase in allotments, the stock of T-bills dropped by about 2 percent month-on-month and amounted to K28,457.7 million. The drop in the outstanding stock was largely due to maturity of T-bills (about K1,348 million) that were converted from part of outstanding Ways and Means Advances which were held by the Reserve Bank. In terms of category holdings, the Reserve Bank and the non-bank sector continued to dominate as they held 36 and 37 percent of the total outstanding stock respectively. The rest was held by commercial banks (19 percent) and discount houses (8 percent).
8.3
Inter-bank Money Market
In response to the increase in maturities as alluded to elsewhere in this report, inter-bank borrowing dropped from K9,042 million recorded in the preceding month to K3,773 million. Consequently, the interbank rate closed the review month at 33.75 percent, constituting a month-on-month decline of 317 basis points. The supply of funds on the inter-bank market was however outweighed by its demand as commercial banks borrowed an extra K460 million from Reserve Bank’s Standing Facilities window to meet the shortfall. 8.4
Open Market Operations
Open market operations remained contractionary during January 2003 as evidenced by a net withdrawal of K550 million from the economy. A total of K4,326 million was injected through RBM bill maturities. Against this injection, K4,876 million was withdrawn through RBM bill issues and OMO T-bill sales. Notwithstanding these intensive open market operations, the RBM bill yield lost 214 basis points, closing the review month at 36.56 percent. The drop in the yield was largely a reflection of the Reserve Bank’s deliberate effort to bring yields in line with the inflation which stood at 10.7 percent as at end January 2003.
16
Monthly Economic Review
8.5
January, 2003
Secondary Money Market
Secondary money market transactions amounted to K1,700 million, a decrease of about K600 million on the preceding month. Almost all transactions (K1,697 million) involved T-bill repo transactions conducted by discount houses.
9.0
REAL SECTOR INDICATORS
9.1
Tea
Tea production in 2002 amounted to 39.2 million kilograms, a 6.6 percent increase on the 36.7 million kilograms produced in 2001.
Estimates indicate that production may
improve further to 41.0 million kilograms in 2002. Climatic changes remain a major factor that affects production of tea in Malawi. A total of 6.7 million kilograms of tea were produced in January 2003, compared to 5.3 million kilograms produced in a similar month of 2002 and representing a 27 percent increase. In January 2003, 1.6 million kilograms of tea were sold which was a 24.5 percent drop on the 2.2 million kilograms sold in a comparable month of 2002. Tea sales are expected to pick up this season due to slightly higher demand for tea. Tea prices slightly picked up during the month averaging US$0.88/kg, a 2.3 percent increase on the US$0.86/kg fetched in January 2002. A total of US$1.4 million realized in January, 22.8 percent below US$1.9 million realized in a similar month of 2002.
9.2
Sugar
Production estimates indicate that a total of 248,703 tonnes of sugar will be produced in the year 2003 compared to 260,617 tonnes produced in 2002, indicating a 4.6 percent drop in production. 2002 was an exceptional year for the sugar growing industry, with very good weather for the crop. However, the estimate for 2003 indicates a normal year for the industry. During the month of January 2003 no sugar was produced. Normally ILLOVO does not produce any sugar during the first 3 months of the year. 17
Monthly Economic Review
January, 2003
A total of 14,189 tonnes of sugar (valued at K403.5 million), were exported during January 2003. These were down by 47 percent when compared to the 26,773 tonnes (valued at K692.3 million) sold in a similar period of 2002. The decline in exports volume was due to a decline in demand in regional markets. The average price fetched during the month of January was K28, 437 per tonne compared to K25,859 per tonne fetched in a comparable month of 2002. The increase in the average price was due to price negotiations.
18
Monthly Economic Review
January, 2003
Annex Table 1: Selected Annual Economic Indicators 1997
1998
1999
2000
2001
2002
Population (million) Population growth rate (%)
9.6 1.9
9.8 1.9
10.0 1.9
10.1 1.9
10.4 1.9
10.61 1.91
National Income GDP at 1994 Factor cost (K’mn)
12,511.6
12,644.6
13,092
13,197.3
12,976.2
12,585.4
GDP at current market prices (K’mn) Real GDP growth (%) GDP per capita (K)
46,264.5
54,792.2
79,822.8
104,110.3
127,600.2
137,773.9
7.0 4,812.3
2.2 5,591.0
3.6 7,993.3
2.0 10,231.1
-1.6 12,305.6
0.1 12,997.5
Consumer Price Index (CPI) Annualized inflation rate (%) Government Budget (K’mn)2 Total Revenue Revenues Grants Total Expenditure Recurrent Development Deficit/GDP ratio (before grants) Deficit/GDP ratio (after grants)
41.1 9.2
53.3 29.8
77.1 44.7
100.0 29.6
122.7 20.2
145.4 10.72
7,652.5 6,311.9 1,340.6 10,073.8 8,125.4 1,948.4 -8.9 -5.7
12,009.8 8,899.8 3,110.0 12,127.0 8,663.1 3,463.9 -6.2 -0.2
19,126.4 14,444.1 4,682.3 21,655.4 14,995.7 6,659.7 -8.8 -3.1
26,279 17,815 8,464 29,812 22,989 6,823 -11.0 -3.2
28,512.6 22,853.2 5,659.4 30,476.3 26,414.0 3,017.1 -5.8 -1.5
37,548.72 24,874.07 12,674.65 44,157.32 32,594.62 11,562.70 -9.7 -3.3
Money and Credit (K’mn) 3 Net Foreign Assets Net Domestic Credit Government Statutory bodies Private (gross) Money Supply (M2) M2 Growth Rate (annual)
1,788.0 3,082.3 1,235.2 243.8 1,603.3 5,555.4 2.2
7,627.5 2,450.5 -425.3 -310.4 3,186.2 8,641.2 55.5
8,848.3 3,978.3 -675.7 1,288.7 3,365.3 11,545.6 33.6
14,252.4 6,208.1 117.3 1,047.1 5,043.7 16,444.2 42.4
11,776.4 11,223.5 5,979.2 -44.8 5,289.1 18,437.9 12.1
2,662.4 23,609.2 16,542.4 -329.6 7,396.5 26,302.7 31.0
1 January, 2003 Year-on-Year inflation (2000=100) 2These are annual projection figures
3Figures from 2002 are for four commercial banks( National Bank of Malawi, Commercial Bank of
Malawi, First Merchant Bank and Finance Bank of Malawi.) 19
Monthly Economic Review
January, 2003
Annex Table 1: Selected Annual Economic Indicators Contd: Balance of Payments (K’mn) Current Account Balance
1997
1998
1999
2000
2001
2002
-5,778.8
-4,395.3
-11,981.4
-4,202.1
-12,386.3
Exports (fob) Imports (fob) Trade Balance Services (net) Private Transfers (net) Capital Account Current account balance (GDP) Total Foreign Reserves (K’mn)
8,483.0 11,254.6 -2,771.6 -2,859.8 -147.0 3,591.6 -13.3 4,035.8
16,734.8 15,442.5 1,292.3 -5,229.3 -458.4 9,840.1 -7.7 13,428.8
13,103.6 19,712.5 25,240.8 -5,528.2 -7,966.4 391.0 10,651.7 -16.7 12,873.5
23,925.1 27,414.2 -3,489.0 -8,959.4 467.0 14,469.4 -19.4 22,463.8
30,121.9 26,214.2 3,907.8 -9,225.9 1,116.1 4,034.6 -12.0 18,785.5
32,381.4 34,106.1 -1,724.6 -11,898.3 1,236.7 6,509.8 .. 20,164.8
Official (gross) Commercial Banks (net) Import cover
3,378.5 657.3 3.1
11,399.3 2,029.5 5.4
11,422.3 1,451.2 5.0
19,500.3 2,963.5 4.7
13,664.2 5,121.3 4.4
15,677.1 4,600.9 3.3
External Debt External debt/GDP
120.4
132.2
129.4
197.6
191.4
92.3
Debt Service Ratio Exchange rate
15.2
18.2
17.7
20.8
20.1
16.7*
End Period MK/US Dollar Average Mk/US Dollar
21.1623 16.4449
43.8836 31.0727
46.4377 44.0880
80.0760 80.0946
68.8138 72.1509
89.65774 876.55274
* Debt Service takes account of debt relief
4 January end period and monthly average exchange rates
20
Monthly Economic Review
January, 2003
Annex Table 2: National Composite Price Index (2000 = 100) Period
All items
Bev & Tobacco 5.9
Cloth & Footwear 8.5
Housing
100.0
Food Costs 58.1
Overall Weight 2001 2001 Jan Feb Mar Apr May Jun July Aug Sept Oct Nov Dec 2002 Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec 2003 Jan
12.1
House hold ops 4.1
Transport ation 5.1
Miscella neous 6.2
122.7
117.6
131.0
130.5
132.9
129.7
122.1
129.8
121.0 123.8 122.3 121.2 120.6 116.7 117.6 117.4 123.6 126.0 129.8 132.4
118.1 121.6 118.1 115.4 113.4 106.3 108.2 107.5 118.4 123.3 128.5 132.4
129.2 130.0 131.6 133.5 133.8 133.8 130.6 130.2 130.3 130.1 130.1 129.3
122.5 125.3 128.2 128.4 130.3 130.4 130.7 130.5 134.0 133.6 134.5 137.1
128.2 130.9 131.0 132.6 134.8 135.0 132.7 135.0 132.1 130.1 135.2 137.3
125.5 126.9 127.2 129.1 129.6 129.4 135.5 134.6 130.2 127.6 128.5 127.4
125.4 126.0 127.5 129.2 129.2 130.9 130.9 131.5 132.1 131.0 132.0 130.3
118.1 119.6 120.3 122.1 122.1 122.2 122.4 122.9 123.4 123.8 123.8 124.9
139.8 143.9 143.3 140.7 139.2 134.9 134.6 135.1 142.7 142.3 145.4 147.6
141.4 146.6 144.1 138.1 135.0 127.6 123.8 124.4 136.7 135.8 139.9 143.3
131.0 131.5 131.4 135.0 135.0 135.0 136.5 138.3 138.3 139.9 143.5 145.4
147.3 148.8 150.0 147.7 148.5 148.8 155.6 166.8 166.5 156.6 158.2 158.5
141.1 146.1 148.9 153.4 153.6 153.5 162.2 162.4 164.4 163.6 165.3 164.4
128.2 130.9 142.1 145.6 145.9 148.0 146.0 146.1 146.3 147.8 149.9 151.1
138.4 139.6 139.4 140.9 141.8 142.1 145.4 145.6 146.1 147.2 149.8 150.8
129.7 131.9 132.0 133.7 134.2 134.2 135.1 135.1 135.5 136.3 137.0 137.5
154.7
153.7
147.0
159.4
168.5
155.2
153.5
139.0
21
Monthly Economic Review
January, 2003
ANNEX TABLE 3: SELECTED FOREIGN EXCHANGE RATES Date Pound Sterling Malawi kwacha Per Pound
U.S Dollar
Euro
Japanese Yen S. A. Rand
Malawi kwacha Malawi kwacha Malawi kwacha Per Dollar Per Euro Per Yen
Malawi kwacha Per Rand
Zimbabwe Dollar Malawi kwacha Per Zim. Dollar Buying Selling 1.1486 1.1545 1.3257 1.3327 1.3061 1.3191
Buying Selling Buying Selling Buying Selling Buying 1999 70.9693 71.6770 43.8676 44.3084 46.7813 47.2362 0.3875 2000 89.0173 89.9158 59.2477 59.8383 54.1345 54.6847 0.5491 2001 103.4436 104.4832 71.8383 72.5563 64.3735 65.0180 0.5919
Selling 0.3914 0.5557 0.5981
Buying 7.1853 8.4586 8.5278
Selling 7.2573 8.5436 8.6137
2001 Jan 117.8587 119.0432 79.7061 80.5072 74.8004 75.5522 0.6835 Feb 115.6011 116.7629 79.5101 80.3092 73.3696 74.1070 0.6843 Mar 113.9481 115.0933 78.8915 79.6843 71.7314 72.4523 0.6508 Apr 112.0262 113.1520 78.0507 78.8351 69.5744 70.2736 0.6302 May 107.4833 108.5633 75.4533 76.2117 64.3315 64.9781 0.6335 June 103.9552 105.0000 73.8056 74.5474 62.4026 63.0298 0.5957 July 97.7748 98.7574 68.4697 69.1579 59.9179 60.5201 0.5491 Aug 95.0672 96.0226 65.1190 65.7734 59.9179 60.4589 0.5485 Sept 90.3587 91.2669 61.4267 62.0441 56.1809 56.7455 0.5149 Oct 90.8136 91.7262 62.4835 63.1115 56.6601 57.2295 0.5103 Nov 95.3615 96.3199 66.9862 67.6594 59.3833 59.9801 0.5405
0.6903 0.6912 0.6573 0.6365 0.6399 0.6017 0.5546 0.5540 0.5201 05155 0.5459
10.2782 10.1880 10.0095 9.7777 9.4328 9.1627 8.3322 7.7708 6.8511 6.6472 6.5257
10.3815 1.4490 10.2904 1.4467 10.1101 1.4317 9.8760 1.4204 9.5276 1.3731 9.2548 1.3431 8.4159 1.2449 7.8489 1.1840 6.9199 1.1168 6.7140 1.1361 6.5913 1.2190
1.4636 1.4612 1.4461 1.4347 1.3869 1.3566 1.2574 1.1959 1.1281 1.1475 1.2131
Dec 97.1488 98.1252 66.9576 67.6306 59.2642 59.8598 0.5100 0.5151 5.5891 5.6453 1.2185 1.2308 2002 Jan 95.5955 96.5563 67.5921 68.2715 58.2779 58.8637 0.5091 0.5142 Feb 102.6115 103.6427 72.3482 73.0754 62.5306 63.1590 0.5401 0.5455 Mar 106.1748 107.2418 74.4303 75.1783 65.0297 65.6833 0.5614 0.5671 Apr 110.0057 111.1113 75.4756 76.2342 68.1621 68.8471 0.58.97 0.5957 May 110.7470 111.8600 75.5076 76.2664 70.9318 71.6446 0.6133 0.6195 June 116.3924 117.5622 76.2279 76.9941 75.2979 76.0547 0.6381 0.6445 July 118.2779 119.4667 75.2404 75.9966 73.9989 74.7427 0.6289 0.6352 Aug 118.1907 119.3738 76.3555 77.1229 75.2178 75.9738 0.6478 0.6543 Sep 125.1898 126.4480 79.9169 80.7201 78.6143 79.0093 0.6574 0.6640 Oct 124.9426 126.1984 80.0914 80.8964 79.0903 79.8851 0.6532 0.6598 Nov 127.6287 128.9113 82.3092 83.1364 81.7083 82.5295 0.6732 0.6800 Dec 139.0285 140.4257 86.7031 87.5745 90.8995 91.8131 0.7314 0.7387 2003 Jan 146.7472 148.2220 88.7655 89.6577 95.9999 96.9647 0.7459 0.7534
22
5.9291 6.3463 6.5290 7.1541 7.8084 7.3686 7.4348 7.1949 7.5822 7.9416 8.8887 10.0642
5.9887 1.2301 6.4101 1.3166 6.5946 1.3545 7.2260 1.3735 7.8869 1.3729 7.4426 1.3872 7.5095 1.3693 7.2672 1.3895 7.6585 1.4590 8.0215 1.4575 8.9334 1.5103 10.1654 1.5779
1.2424 1.3299 1.3681 1.3873 1.3867 1.4012 1.3830 1.4035 1.4690 1.4722 1.5254 1.5937
10.3819 10.4863 1.6154 1.6316
