perks m ligoya : the challenge of making sound policy choices speech by dr perks m ligoya, governor of the reserve bank of malawi, at the official opening of the financial programming and polices course, lilongwe, 1 march 2010. * * * the director, macroeconomic management programme, mefmi distinguished resource persons mefmi staff course participants ladies and gentlemen it is a great pleasure and honour for me to join you on the occasion of the official opening of this regional course on financial programming and policies. allow me to begin by extending a very warm welcome to you all on behalf of the government and the people of malawi, and also on my own behalf. i wish to extend a warm welcome to the macroeconomic and financial management institute of eastern and southern africa ( mefmi ) staff and resource persons. we in malawi are most delighted to be associated with mefmi and to host one of your capacity building events once again. a special welcome to colleagues from mefmi member states. may your two week stay in malawi be both enjoyable and fruitful. let me acknowledge the presence of our regional resource persons, who have taken time off their busy schedules to assist us in this important event. i am pleased to note that the team wholly comprises experts trained by mefmi under its flagship fellowship development programme. this is an indication that mefmi ’ s capacity building efforts are now bearing fruit on a sustainable basis. we wish to commend the institute for this achievement. this course, i am informed, is designed for middle to senior level officials from the ministries of finance and economic planning and central banks. these officials provide an important technical input into macroeconomic and financial policies and are sometimes also involved in policy design and implementation. this course aims at enhancing their understanding of the design and implementation of macroeconomic and financial policies. it is most pleasing therefore to see a number of you here representing key economic and financial institutions in our region. may i urge you all to make the most of this rare opportunity. experience from the region shows a general institutional bias in skills among our economists. for example, economists in the ministries of finance tend to have a firm appreciation of fiscal issues but limited understanding of balance of payments and monetary and financial issues. similarly economists in central banks may also be weak in fiscal and national accounting. this, coupled with the weak coordination among key macroeconomic management agencies, often leads to the formulation of inconsistent macroeconomic policies, resulting in poor economic

##ary risks and further policy rate cuts by the ecb have faded and focus is beginning to shift towards a normalisation of policy in the future. indeed, as the governing council has recalled recently, if the euro area economy recovers and inflation proceeds further on its path towards the ecb ’ s inflation aim in a sustained manner, a discussion on policy normalisation becomes warranted in the future. any such discussion should, of course, take place in a structured, orderly and appropriately prudent manner and the governing council is convinced of the need to continue an accommodative monetary policy stance without deviation from the announced measures under implementation to be expected. but we could examine the interaction of our different policy measures and their functioning in a new environment of balanced prospects as opposed to the environment of deflationary risks that prevailed when they were first introduced. as has been stated, our forward guidance needs to be aligned with an evolving assessment to underpin both the consistency and credibility of our communication. prospects for the banking system in this context, it is imperative that the banking sector is well - positioned to foster sustainable growth in the coming years as the exceptional levels of monetary policy support will be adjusted in line with the progress towards our policy objective. a well - functioning, profitable and resilient financial sector is vital for the long - term economic prospects of the euro area. allow me, then, to make three remarks on this topic. my first remark relates to bank profitability. as i have just discussed, the ecb ’ s unconventional monetary policy measures have been successful in fulfilling their intended purpose. but that is not to say that they did not have any side effects. they have drawn criticism for their 2 / 5 bis central bankers'speeches negative effects on financial sector profitability. i believe such criticism is somewhat unbalanced. in the absence of the recovery generated by these unconventional measures, unemployment would have been higher, credit growth lower and a greater proportion of loans would have been non - performing. all of these things would have weighed on banking sector profitability. moreover, while acknowledging that banks face a charge because of the negative rates policy, internal data show that this burden is alleviated by the benefits gained in wholesale funding markets. between january and march 2017, on average, two thirds of overnight unsecured funding was raised at an average rate of around – 46 basis points, essentially through counterparties having no access to the ecb facilities. similar developments were observed in the secured markets for