in money supply observed earlier in the year. on the external sector, it is pleasing to note that foreign exchange reserves have been building up rapidly since the attainment of the hipc completion point in august 2006. between september 2006 and january 2007, the country has been benefiting from inflows from various donor partners, including the imf, the british & norwegian governments, the european union and dfid because of good performance. as a result of these inflows, the country ’ s gross official reserves improved significantly. prospects for 2007 let me now give you a picture of our expected outcome for 2007. gdp growth in 2007 is projected to grow by 5. 6 %, a slower growth from 8. 5 % in 2006. the agricultural sector is expected to continue leading this growth due to the on - going fertilizer subsidy program coupled with the current favourable rains. by december 2006, inflation rate had decelerated to 10. 1 percent. in january 2007, the rate of inflation dropped to a single digit of 9. 6 percent and it is expected that it would continue dropping further. this is mainly premised on the high food supply situation in the country ( especially maize ), that is expected to have a restraining effect on food inflation, which normally accelerates during this time of the year. the favourable outlook for inflation is based on the continued stability in food prices, the stable kwacha exchange rate and the easing of pressures on international oil prices. in 2007, growth in money supply will be closely monitored to safeguard and consolidate the declining rate of inflation and the overall financial system stability. the stability of the local currency will continue to depend on the flow of foreign exchange from the tobacco auction floors and the donor community, prices of petroleum products, as well as government ’ s fiscal discipline. distinguished ladies and gentlemen, this favourable outlook which i have outlined would assist the country to attain a higher rating at the end of 2007 compared to that of 2006. the improvement in credit rating being officially announced today will assist in enhancing pricing and access to international capital markets. this would in turn enhance the inflows of private capital and hence increased investment. the goodwill that we have built with the international community will be further strengthened and this will ultimately signal that malawi is a better place for doing business. in conclusion, distinguished ladies and gentlemen, i would like to acknowledge the collective efforts played by all stakeholders for the success of the credit rating exercise. these include the minister of finance, members of parliament

increasing number of players in the banking industry entails stiff competition. competition should normally favour customers because in the quest to win more customers, banks tend to relax terms and conditions for their products and improve service. however in malawi the competition is yet to bear fruit by narrowing the gap between lending rates and deposit rates. recent statistics indicate that over 80 % of the population of malawi remains un - banked and many of these people are in the rural areas. it is therefore commendable to note that msb has identified itself with the rural communities for a very long time and continues to establish its presence in new areas. i call upon all the authorized dealer banks in malawi to emulate the example set by msb in delivering new products and services on the door steps of the rural people. i would also like to urge management of the bank to leverage on this network, which is a competitive edge, to roll out products and services that should be convenient and easy to use by ordinary customers. the finscope study should render its usefulness in this regard. memories are still fresh on the economic meltdown that engulfed western economies in the recent past. from a regulatory point of view, the reserve bank of malawi is proud to observe that our financial sector went through these hard times with a lot of resilience. this is because of the stringent supervision of the banks that rbm provides. furthermore our banks are very well capitalized and managed. the world bank and the imf still believe that malawian banks are the most profitable in africa. as a regulator of the financial sector, the reserve bank of malawi will continue to strengthen its supervision function. for example, the supervision of the non - bank financial institutions will grow to include pensions, macro - finance and insurance as stand alone departments. we should all be very thankful to the present government of his excellency ngwazi dr bingu wa mutharika because it is now evident that security within malawi has been enhanced. this is the major reason why banks should be even more confident to open branches in rural areas. financial inclusion is one of the current major themes of the reserve bank of malawi hence my happiness and gratitude to the malawi savings bank for opening yet another branch today. i therefore congratulate and commend the board and management of malawi savings bank on this auspicious occasion. however, let them and all staff of the bank not relax considering the many challenges that the bank and the industry at large face ; particularly with the growing