K80.6 billion mopped up: What it means for Malawi’s entrepreneurs and investors
Key Business Points
- RBM withdraws K80.6 billion through OMO, reinforcing a tight monetary policy that will raise borrowing costs for small enterprises while aiming to curb inflation.
- Inflation slipped to 19.4 percent in September 2026, its first dip below 20 percent since May 2022, yet the IMF still projects an average of ≈22 percent for 2026, signaling lingering price pressures.
- The government plans to bring headline inflation down to 15 percent by the end of 2026, but analysts warn that tighter credit could squeeze cash‑strapped firms unless alternative financing is introduced.
Malawi’s financial landscape is at a crossroads as the Reserve Bank of Malawi (RBM) continues to prune liquidity in an effort to keep prices under control. According to the Financial Market Update released by Bridgepath Capital for the week ending October 23, RBM pulled K80.6 billion from the market through open market operations (OMO). The bulk of the withdrawal—K68.5 billion—was achieved via overnight operations, while K10 billion and K2.1 billion came from 62‑day and 60‑day agreements, respectively. All three tenors received equal applications and allotments.
The central bank did not hold Treasury Bill auctions for any tenor during the review period, and there were no applications or allotments for those bills. The two‑year Treasury Note attracted applications of K70 million, but no allotments were made. This tight stance follows a 24 percent policy rate, which RBM maintains to anchor inflation expectations.
Recent data from the National Statistical Office shows inflation easing to 19.4 percent in September 2026, marking the first time the rate fell below 20 percent since May 2022. Despite this progress, the International Monetary Fund’s October 2026 World Economic Outlook forecasts Malawi’s inflation will average 21.9 percent in 2026 and rise to 25 percent in 2027, underscoring the fragile nature of the price decline.
Bertha Phiri, Executive Director of the Malawi Economic Justice Network, described the liquidity withdrawal as a clear signal of RBM’s resolve to keep monetary policy tight. “By withdrawing money, RBM reduces aggregate demand and slows growth in money supply, which in Malawi has been a key driver of inflation, alongside food and forex pressures. It complements the 24 percent policy rate,” she explained. However, she cautioned that the move could increase borrowing costs for businesses, especially small enterprises that rely on commercial bank loans for working capital.
Economist Marvin Banda urged a broader perspective, noting that government borrowing has added to the pressures the central bank is trying to manage. “RBM must, therefore, explain whether this withdrawal addresses genuine excess liquidity or merely tightens an already difficult credit environment,” he said. His comments highlight the tension between fiscal needs and monetary discipline.
The 2026‑27 national budget projects headline inflation to fall to 15 percent by year‑end 2026, reflecting the government’s optimistic outlook. Yet the IMF’s higher forecast suggests that investors and entrepreneurs should remain cautious.
For local business owners, the current environment presents both challenges and opportunities. Access to affordable credit may become scarcer, making it essential to explore alternative financing channels such as cooperative savings, micro‑finance institutions, and digital lending platforms. At the same time, price stability—if sustained—could improve consumer confidence and stimulate demand for locally produced goods, supporting Pambali yathu (our business) growth.
Policymakers are encouraged to balance tight monetary measures with initiatives that kulimbikitsa zigwidwana (encourage enterprises), such as targeted support for small and medium enterprises, improved access to foreign exchange, and programs that strengthen local supply chains. By doing so, Malawi can aim for a more resilient economy that supports both kuwonekera kwachangu (our vision) and lasting economic prosperity.
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