Members of the Board of Directors
Senior Management
Heads of Department
Pensioners
Distinguished Guests
Ladies and Gentlemen

It is my pleasure to welcome you all, to this year’s Christmas Party.  This is a traditional event and marks the end of year activities which frankly for the Central Bank has been preceded by both achievements and challenges. This is the time when we take stock of activities during the year. It is also the time when staff and management meet to discuss issues of mutual interest in a relaxed and informal environment.  Let me extend a special welcome to the Board of Directors, retired members of staff and our spouses.

I wish to start by giving an overview of the status of the Economy in 2008
Specific to the Reserve Bank, Ladies and Gentlemen, the primary objective of achieving price and financial stability so as to contribute towards national economic growth and development was achieved during 2008. For the country in general, 2008 has seen Malawi, enjoy strong economic growth for a third consecutive year.  The inflation rate, though increasing recently has remained moderate and in the single digit levels, whilst the exchange rate has remained stable throughout the course of the year.  Nonetheless, there have been some challenges that have arisen particularly from high fuel and fertilizer prices.
 
A tight monetary policy was pursued during the year to contain inflationary pressures.  This was achieved through the issuance of RBM bonds and Treasury bills.  In addition, from April 2008, the scope of the liquidity reserve requirement was widened to include the discount houses.  Despite these efforts, money supply growth remains high.  

Throughout the year, the Malawi Kwacha remained fairly stable against the United States dollar.  This was on account of the fact that during the first six months of the year the US dollar grew relatively weaker against other major currencies.  Intervention by the Reserve Bank of Malawi through direct purchases of foreign exchange from the tobacco auction floors and sales to the market, also helped to keep the Kwacha stable. 

Regarding relations with the donor community, let me mention that the country’s 6th and final review of the Poverty Reduction Growth Facility (PRGF) economic program with the International Monetary Fund (IMF) was concluded successfully in June 2008.  Since then, Government has been discussing the possibilities of a new program with the IMF.  I am pleased to inform you that on the 3rd of December, the Executive Board of the IMF approved a new one year program under the Exogenous Shock Facility.  This facility will be used to support the terms of trade adjustment to the terms of trade shock caused by the rapid increases in fuel and fertilizer prices in the first part of 2008.  This one year program is expected to persuade other donors to join the Fund in helping us in our development endeavours.

As I mentioned earlier, there are challenges that we currently face and are likely to continue to face in the ensuing months.  Malawi is experiencing a serious terms of trade shock caused by higher fuel and fertilizer import prices. As custodians of the country’s reserves, we are also facing the problem of low foreign exchange reserves that are fluctuating between 0.8 and 1.4 months of prospective imports.  This is due to increased demand for foreign exchange which has outstripped supply on account of seasonal demand, the high fertilizer imports for the government’s input subsidy program, high petroleum import bills and overall increased demand as a result of increased economic activity. 

In addition, although the global financial market crisis has not affected us directly through our domestic financial sector, it is likely to impact the domestic economy through the trade route.  It is likely to manifest itself in a reduced demand for our exports in the coming year, which will in turn affect the country’s economic growth and poverty reduction efforts.  As a central bank, the global crisis has put the Reserve Bank of Malawi on alert, in terms of regulation and supervision of our own domestic financial sector to ensure its soundness and stability.

Secondly, let me comment on the 2008 Financial Performance of the Reserve Bank of Malawi

The Bank had in the recent times been facing challenges to sustain its capital base largely due to losses it had been incurring.  As you might all recall, the same time last year I reported that the underperformance in income was the main contributing factor to the unimpressive financial performance of the Bank.  This was as a result of fiscal pressures and a weak foreign currency reserve position.

I am pleased to report that the authorities in the Ministry of Finance and the Bank resolved to address the losses using both income enhancement and expenditure reduction measures. In January 2008, Government being a sole shareholder   gave the Bank additional resources in form of capital injection. These resources were invested in Treasury Notes to enable the Bank earn enough income to cover its operations. With regard to expenditure containment, the Bank implemented a number of initiatives in the discretionary spending areas which included disposal of institutional houses and discontinuing of all non-core activities. 
 
It gives me immense pleasure to report that total income in 2008 is expected to out-perform the budget expectations and would surpass the 2007 result.   Through its continued monitoring and controlling expenditure efforts, the Bank is projecting a reasonable budget savings in operating costs which consists primarily of administrative and staff costs. The 2008 position will significantly lower than the previous year’s expenditure outturn. On other hand, costs that are incurred in pursuit of the Bank’s mandate particularly for Currency Management operations remained a challenge in 2008. It should be appreciated however, that maintaining the proper quality of currency notes in circulation is a huge and costly task in a cash-based economy like ours. This notwithstanding, the Bank is likely to end up in a profit position this year. For this, I would like to commend management and staff for their dedication and commitment towards ensuring that the proposals for turning around the Bank’s performance were adequately implemented. The gains achieved through this collective effort will enable us to implement efficiency enhancement measures in our operations.

Thirdly, let me briefly touch on some of the Bank’s projects for 2008/2009

Replacement of the 330KVA Standby Power Generator at the Basement.
The Bank has acquired and installed a new 400KVA standby generator at the Head Office as a power supply backup replacing the obsolete 330KVA generator.  The installation of the new generator will therefore provide smooth and continuous operation at all times in the Bank than it was previously the case.

Lift Modernization
The Bank embarked on a project to improve the passenger lift system at its Head Office.  The new lift equipment will replace the current passenger lift system that has limited capacity and has been characterized by slow service and frequent breakdowns due to its old age. I am therefore, pleased that we have received the equipment for the new passenger lift and that installation will commence in January 2009 and will take about twenty weeks to complete.

Mzuzu Branch Project
I am pleased to inform members of staff that the construction of Phase 1 for the Mzuzu Branch Project is progressing well the following foundation stone laying ceremony that was presided over by His Excellency, the president Dr. Bingu wa Mutharika on 4th July 2008. It will soon be completed.  Thereafter, the project will go into Phase 11 involving construction of the superstructure and commissioning of the building.  Meanwhile, adverts have been posted in the local media for tendering of this phase.

Personnel
The staff complement at the beginning of the year 2008 was 615. However, due to staff movements during the year, the staff position now stands at 610.

Since 2006 Management took a deliberate action to put on hold recruitment in order to come up with a reasonable staffing establishment for the Bank.  However, following the rationalization of critical vacancies, 12 positions were filled in the course of the year under review.   21 members of staff exited the Bank through various modes notably resignations, termination, dismissal, retirement, expiry of contract and death.

Training
The Bank continued with its efforts of training staff in order to improve performance.  In addition, the Bank awarded postgraduate scholarships to three members of staff, who are currently pursuing their studies in the United Kingdom. The Bank also continued to support staff pursuing self-initiated professional courses.  I am hopeful that the initiative taken by the Bank will translate into enhanced performance so that we are able to justify the enormous investment we continue to make in staff training and development.

Performance and Organizational Development

The Bank implemented the revised Performance Management System effective January, 2008. During the year, the Bank also embarked on Organization Review with assistance from Norges Bank, under the existing technical cooperation between the Reserve Bank of Malawi, the International Monetary Fund and Norges Bank, encompassing a broad based central bank modernization program for the RBM with the main aim of making its operations more efficient. Details of progress of the project have been communicated to members of staff from time to time through relevant channels. However, let me point out that the project is expected to be finalized early next year and therefore, take this opportunity to thank you all for your cooperation and support so far during this important exercise.

Pensions & Staff Welfare
During the year, members’ pension values were enhanced through the distribution of non-cash bonus and payment of interest based on members’ pension holdings.  In addition, the Bank enhanced both the retirement and death-in-service packages for members of staff.  I am also pleased to inform you that similar improvements were made on RESMAID where the Scheme made financial gains after years of losses. Members of staff are therefore assured of the Bank’s commitment to maintain a healthy and productive workforce.

Finally, I would like to thank, in a special way, members of the Board for the positive contributions they have made in the operations of the Bank. I also recognize the presence of some of the pensioners who have managed to attend this year’s Staff Christmas Party and thank them for having spared time to be with us tonight. To our spouses, we appreciate your support and understanding given the long hours that most of us have to put into our work.

In conclusion, I would like to take this opportunity to wish you all a Merry Christmas and a Prosperous New Year.

Thank you for your attention and

MAY GOD BLESS YOU ALL.