Malawi’s Economic Pulse: What Slowing Money Supply Growth Means for Your Business
Key Business Points
- Malawi’s money supply growth slowed to 42.7 percent in October 2025, down from 51.0 percent in September, driven by a drop in highly liquid balances, which is a key consideration for businesses relying on liquidity.
- Inflation pressures are being driven more by food and exchange-rate shocks than by liquidity alone, with maize prices being a significant driver of inflation, affecting businesses in the agricultural sector.
- Policymakers face a complex trade-off in managing broad money, stabilizing maize supplies, and the kwacha to achieve durable disinflation, which has implications for inflation management and monetary policy.
The growth in Malawi’s money supply slowed sharply in October 2025, with the annual growth rate of broad money (M2) easing to 42.7 percent from 51.0 percent in September. This reversal was driven mainly by a drop in highly liquid balances, with demand deposits falling by K231.4 billion to K2.6 trillion, and currency outside the banking system declining by K55.9 billion to K1.2 trillion. In contrast, term deposits rose by K67.7 billion to K2.7 trillion, and foreign-currency deposits increased by K19.8 billion to K667.9 billion.
According to the Reserve Bank of Malawi (RBM), the rise in term deposits partly reflects farmers mobilizing savings ahead of the 2025/26 planting season, indicating that some liquidity is being parked in longer-tenor instruments rather than circulating as cash. This has implications for mkandawire (business owners) who rely on liquidity to manage their daily operations.
A review of the first 10 months of 2025 shows that, despite the October pullback, money supply has expanded significantly over the year. M2 stood at K5.37 trillion in January, with an annual growth rate of 40.8 percent, and marginal month-on-month growth of 0.6 percent. Through the first-quarter, broad money hovered around K5.4 trillion as annual growth eased to 33.9 percent in March, and month-on-month changes remained subdued, at under one percent.
While the RBM has tightened policy in a bid to contain inflation, some economists argue that Malawi’s price dynamics are being driven more by food and exchange-rate shocks than by pure monetary expansion. Former RBM governor Elias Ngalande noted that maize prices remain the single most important driver of inflation in Malawi, saying "In Malawi, the major driver of inflation is maize prices, not the money supply as believed by most economists."
University of Malawi academic Winford Masanjala cited empirical data suggesting that about 52 percent of Malawi’s inflation is explained by maize price changes, with most of the remainder linked to exchange-rate pass-through. This highlights the importance of stabilizing maize supplies and the kwacha to achieve durable disinflation, which is a key consideration for Businesses in Malawi.
The divergence between slowing money-supply growth and persistent price pressures leaves policymakers facing a complex trade-off. While the RBM appears to be reining in liquidity toward the end of 2025, analysts argue that durable disinflation will depend as much on stabilizing maize supplies and the kwacha as on managing broad money. This has implications for monetary policy and inflation management, and businesses should be aware of these factors when making decisions about mkandawire (investment) and chinthu (trade).
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