Malawi’s Money Supply Growth Cools: What It Means for Business and Investment
Key Business Points
– Malawi’s annual broad money supply (M2) growth slowed to 42.9 percent in Q4 2025 from 51 percent the previous quarter, reflecting reduced public sector borrowing and improved liquidity management.
– Term deposits and foreign currency holdings grew strongly, indicating shifting preferences among savers amid macroeconomic reforms.
– Economists cite early signs that austerity measures and tighter fiscal policy are beginning to stabilize money supply growth, though structural challenges like inflation and forex shortages remain.
Malawi’s annual broad money supply (M2) growth decelerated to 42.9 percent in the fourth quarter (Q4) of 2025, down from 51 percent a quarter before, and by 45.1 percent recorded during the corresponding period in 2024. This is according to the recently published Financial and Economic Review for Q4 by the Reserve Bank of Malawi (RBM).
Money supply is the total amount of money circulating in an economy at a given time. RBM attributed the easing in money supply growth largely to a slowdown in net credit to the public sector, particularly reduced borrowing by the Central Government and public nonfinancial institutions.
Despite the slowdown, the growth rate remains elevated, pointing to continued expansion in liquidity, albeit at a more moderate pace.
“The deceleration in broad money growth was attributed to lower year-on-year increases in demand deposits and currency outside banks of K715.7 billion and K487.9 billion in 2025 Q4, compared to increases of K1 trillion and K616.7 billion in 2025Q3, respectively,” the report states.
In contrast, less liquid components of money supply recorded stronger growth, as term deposits rose by K937.8 billion, up from K881.7 billion in the preceding quarter, while foreign currency deposits rebounded with an increase of K151.3 billion, following a contraction of K16.5 billion in the third quarter.
These increases helped partially offset the slowdown in demand deposits and currency in circulation. As a result, the contribution of demand deposits to overall M2 growth declined to 13.4 percentage points from 20.8 percentage points in the previous quarter. Currency outside banks contributed 9.1 percentage points, down from 12.6 percentage points, while term deposits saw a marginal decline in contribution to 17.6 percentage points.
Notably, foreign currency-denominated deposits shifted from a negative contribution of minus 0.3 percentage points to a positive 2.8 percentage points, highlighting growing preference for foreign currency holdings.
Economist Velli Nyirongo said the situation entailed that austerity measures and efforts to reduce government borrowing were bearing fruit. “This means that while liquidity conditions remain elevated in absolute terms, the pace at which money is being injected into the economy is slowing,” Nyirongo said.
According to Nyirongo, this development also aligns with the slight easing in inflation currently at 24.1 percent, observed over the corresponding period, suggesting that policy measures were beginning to gain traction and that macroeconomic management was moving in a more disciplined direction.
However, he cautioned that sustainability of the trend may be affected by persisting microeconomic challenges. “Structural pressures remain significant, including elevated inflation, persistent foreign exchange shortages and ongoing fiscal imbalances. These factors can, if not carefully managed, continue to exert upward pressure on money supply growth,” he said.
For Malawi’s business community, the moderation in M2 growth signals more stable financial conditions, which could improve long-term planning and investment. The shift toward term and foreign currency deposits reflects a cautious saver sentiment, driven by inflation fears and forex scarcity.
While government borrowing restraint is a positive step, lasting stability will depend on addressing deeper fiscal and structural bottlenecks. Entrepreneurs and investors should watch for continued policy consistency, as disciplined money supply management could create a more predictable environment for business growth in the months ahead.
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