and productivity. the second purpose of the program is to strengthen our international liquidity position. this means having the tools to deal with external turbulences. all the available evidence shows that a strong international reserves position helps to protect the economy of financial shocks coming from abroad, which in turn reduces the risk premiums of the economy. in our present bis central bankers ’ speeches conjuncture, the level of reserves we are pursuing with the program sets us on a very good foot in case of a major global disruption. holding reserves is tantamount to having an insurance policy. during the good times, it bears a cost associated with the differential between the yield of foreign liquid and safe assets, and the cost of the domestic liabilities that finance them. however, during episodes of global recession and financial stress, the available reserves permit to cushion the impact of the shock on the cost of the country ’ s external financing and provide increased flexibility to economic policies to mitigate the effects on the domestic economy. fluctuations in the international value of the peso cause significant volatility of our accounting results, as we have seen in recent years. in good times, the peso tends to appreciate, which generates accounting losses as the net worth is measured in pesos due to the effect of reserves revaluation. but during times of global slowdown and increased financial stress, the opposite occurs, with a peso depreciation and greater net worth in the books ( figure 5 ). as is typical of our yearly account to the senate, in this report we present the evolution of the bank ’ s balance sheet and its prospects for the next year. in the baseline scenario, if the gap between external and internal interest rates remains, we expect that the profitability of our assets will continue to fall short of the cost of our liabilities. although we foresee no further deterioration in the bank ’ s equity, it will continue to be negative. the recent increase in international reserves has a negative effect on these results, but it has to its favor the intangible benefit of a strengthened liquidity position. however, as we said when we announced the intervention program, the level of international reserves we will reach by the end of the year is close to the limits that can be absorbed by our equity position. still, this net worth – which originates mainly in the costly financial crisis of the 1980s – has not been an obstacle for the bank to conduct its monetary policy with independence and flexibility. to sum up, we face

mary c nkosi : profile of the reserve bank of malawi speech by mrs mary c nkosi, deputy governor of the reserve bank of malawi, during the african bible college students ’ visit to the reserve bank of malawi, lilongwe, 4 may 2007. * * * mr. jason pink, leader of delegation, african bible college mr eckton chinyanga, member staff students of african bible college the general manager senior management heads of department members of staff i would like to welcome you mr. pink, staff and students to the reserve bank of malawi. it is my pleasure to see you and your team, visit this institution today. such visits accord the bank an opportunity to explain to the public in general and to students in particular, the activities that take place at the institution. i am hoping that you will be able to relate what you learnt in class with what you are going to hear and see during your visit today. let me start by saying that the reserve bank of malawi ( rbm ) is a central bank. as such it is charged with many responsibilities which include the attainment of price stability or low inflation and ensuring a sound financial system to facilitating economic growth and development. the reserve bank of malawi was established under an act of parliament in july 1964 ( caption 44 : 02 ) and started its operations in june 1965. in april 1989 the reserve bank of malawi act was revised stipulating the bank ’ s principal functions which are in the interest of the national economy and are in line with the economic policies of the government. the 1989 act made the reserve bank independent from government under section 4. at this juncture, let me touch on the functions and responsibilities of the reserve bank of malawi. these can be split into 3 main parts : a. main functions of the bank b. delegated functions of the bank c. other functions of the bank departments in the bank are set up in such a way so as to fulfill these functions and responsibilities. a. main functions of the bank 1. formulation of monetary policies and maintenance of price stability the main function of the rbm is to maintain price stability in the economy so as to minimize inflation. • 2. it does this by controlling money supply growth using 4 major policy instruments : open market operations, liquidity reserve requirement, the discount rate and repurchase arrangements. to issue legal tender currency in malawi the rbm is the only institution that is legally authorised to produce statements that can be used as final means of payment for