Key Business Points
- Differential policy rate proposal: The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) has suggested introducing a differential policy rate to increase access to affordable credit for productive sectors and stimulate economic growth.
- Competitiveness concerns: Malawi’s policy rate of 26 percent is higher than in neighboring countries, potentially hindering industry growth and competitiveness.
- Multifaceted approach to monetary policy: Experts emphasize the need for strong legal and policy instruments, as well as complementary supply-side measures, to ensure the effectiveness of a differential policy rate system.
The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) has proposed the introduction of a differential policy rate by the Reserve Bank of Malawi (RBM) to enhance access to affordable credit for productive sectors and boost economic growth. Lucky Mfungwe, MCCCI Business Development Director, made the proposal during a Monetary Policy Committee (MPC) stakeholder meeting in Blantyre, citing the disparity between Malawi’s policy rate and those of neighboring countries, such as Zambia, Mozambique, and Tanzania. This discrepancy could hamper industry growth and ability to compete with neighboring countries.
Mfungwe’s proposal is based on MCCCI’s analysis of macroeconomic trends from 2015 to 2025, which revealed persistent inflation, reactive monetary policy, and sluggish gross domestic product (GDP) growth. He emphasized the need for strong legal and policy instruments to implement a differential policy rate system, ensuring transparency, targeting, and effectiveness. This approach could be a viable short to medium-term solution for Malawi to support the private sector while maintaining monetary discipline.
However, Mfungwe cautioned that the success of a differential policy rate hinges on clearly defined sector targets and eligibility criteria to avoid abuse of the system. He also noted that while the RBM’s policy is actively tackling inflation, structural challenges continue to limit sustainable growth, suggesting that monetary measures alone are insufficient. As the Malawian business community would say, "pakuti ndikukwana" (in order to be successful), a multifaceted approach is necessary.
Leslie Fatch, President of the Financial Dealers Association of Malawi, welcomed the decision to hold the policy rate steady, stating that further increases would have worsened inflationary pressures. He suggested that the RBM should leverage other tools for managing inflation alongside the current stance. Meanwhile, RBM Director of Financial Markets Chakuza Linje confirmed that discussions on a differential policy rate are ongoing, with technical reviews assessing its potential impact on money supply, production, and overall economic health.
Luscious Pawa, senior economist at the Economic Association of Malawi, stressed the importance of complementing monetary policy with supply-side measures. He applauded the MPC’s consistency in policy despite global uncertainties and market volatility, noting that earlier recommendations are being considered, especially regarding inflation control and foreign exchange supply. As Malawian entrepreneurs would say, "tithandize kwa Nzeru" (let’s work together), a collaborative approach between the government, private sector, and financial institutions is crucial for achieving economic growth and development.
What are your thoughts on this business development? Share your insights and remember to follow us on Facebook and Twitter for the latest Malawi business news and opportunities. Visit us daily for comprehensive coverage of Malawi’s business landscape.
