RBM’s Monetary Policy Shift: A Catalyst for Malawi’s Economic Growth

Key Business Points

• The Reserve Bank of Malawi (RBM) is expected to consider loosening monetary policy at its upcoming Monetary Policy Committee (MPC) meeting, following a significant decline in inflation and money supply growth.
• Economists recommend a policy shift to address supply issues, as the current tight monetary policy has not been effective in controlling inflation, particularly non-food inflation, which remains stubbornly high.
• A policy rate cut is projected, with some economists expecting a significant cut in the 2026/27 budget presentation in March, which could support economic growth and provide opportunities for local entrepreneurs to thrive, or as they say in Chichewa, "kugwira ntchito kwambiri".

The Reserve Bank of Malawi (RBM) is facing pressure to reconsider its monetary policy stance, as inflation and money supply growth have eased significantly. The inflation rate has dropped from 35 percent in January 2025 to 26 percent at the end of December 2025, while money supply growth has slowed from 52 percent in August to 42.8 percent in October 2025. According to economists, this decline is largely attributed to maize supply interventions, which suggests that tight monetary policy may not be the most effective way to control inflation in Malawi’s environment.

University of Malawi economics lecturer Edward Leman notes that the standard monetary policy framework may not be suitable for Malawi’s current situation, given the stubbornly high non-food inflation. He recommends a more practical and context-specific approach to inflation management, taking into account the unique characteristics of Malawi’s economy, such as the importance of "zachuma" (agricultural produce) in the country’s inflation dynamics. Leman suggests that loosening monetary policy could help address supply issues and support economic growth, which is essential for "kuzitsatira kwa mphamvu" (boosting economic development).

Mzuzu University economics lecturer Christopher Mbukwa agrees, stating that the MPC should review the policy rate and shift its focus towards the supply side, as food inflation is projected to continue easing. He notes that the government’s direct maize market intervention has been more effective in reducing inflation than the heightened policy rate, which has been in place for over three years. This highlights the need for a more "mphamvu" (effective) approach to monetary policy, one that takes into account the complexities of Malawi’s economy.

Economics Association of Malawi president Bertha Bangara-Chikadza notes that while inflation has declined, the trend reflects the combined effects of tight monetary policy and timely supply-side interventions like maize imports. She cautions that inflation is still high, and non-food inflation is on the rise, which could impact "mipango ya kifedha" (financial planning) for businesses and individuals. Economic consultant Booker Matemvu projects a slight policy rate cut, but notes that the economic forecast remains volatile until the 2026/27 budget is presented in March.

The RBM’s latest Market Intelligence Report projects an optimistic inflation outlook for the near-term, noting that easing food prices have bolstered Malawi’s inflation resilience to external shocks. The 2025 annual inflation rate stood at 28.4 percent, down by 3.8 percentage points from 2024, anchored by dropping food prices. As the RBM considers its next move, businesses and entrepreneurs in Malawi can expect a potential policy rate cut, which could provide opportunities for growth and investment, and help to "kuletsa malawi kwa mtsogolo" (drive Malawi’s development forward).

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