Reserve Bank of Malawi to ‘regulate’ forex distribution – The Times Group

Revitalizing Malawi’s Economy: Reserve Bank’s Forex Distribution Overhaul Set to Stimulate Business Growth

Post was last updated: August 6, 2025

Key Business Points

  • The Reserve Bank of Malawi (RBM) is developing a new framework to compel commercial banks to allocate a specific share of their foreign reserves to productive sectors, in an effort to boost production and address supply-side bottlenecks.
  • The central bank is engaging with foreign financing institutions to bankroll catalytic investments in the country, while also facilitating the rollout of new ventures to support economic growth.
  • The National Planning Commission (NPC) is emphasizing the need for a developmental state philosophy in Malawi’s industrialization approach, which entails unlocking opportunities by making investments in catalytic areas and removing investment obstacles in priority sectors.

The Reserve Bank of Malawi (RBM) has announced plans to develop a new framework that will require commercial banks to allocate a specific share of their foreign reserves to productive sectors. This move is aimed at addressing the country’s foreign exchange shortage and boosting production. According to RBM officials, some Foreign Currency Denominated Account (FCDA) holders are holding on to their forex, further fueling the unavailability of foreign exchange for productive purposes. The draft framework has already been shared with commercial banks for feedback and will be announced soon once the processes are finalized.

The RBM is also engaging with foreign financing institutions to bankroll some catalytic investments in the country, while facilitating the rollout of new ventures. This is part of the central bank’s efforts to support economic growth and address the country’s balance of payments deficit. The Monetary Policy report shows that the country’s official and private sector foreign reserves have declined to just above $500 million, highlighting the need for urgent action to address the foreign exchange shortage.

The National Planning Commission (NPC) is emphasizing the need for a developmental state philosophy in Malawi’s industrialization approach. This entails unlocking opportunities by making investments in catalytic areas and removing investment obstacles in priority sectors. According to NPC’s Director of Planning, Grace Kunchulesi, this approach is in line with the principles of Malawi 2063, which aims to transform the country into a upper-middle-income economy. The NPC is working to identify areas where the government can make investments to unlock the full potential of the private sector and drive economic growth.

The country’s terms of trade have deteriorated in the first six months of the year, with the deficit increasing by 9.8 percent to $1.27 billion. This highlights the need for Malawi to diversify its exports and reduce its reliance on imports. The RBM’s new framework and the NPC’s developmental state philosophy are both aimed at addressing these challenges and supporting economic growth. As Kutengana ndi kupanga (planning and implementation) are key to achieving these goals, it is essential for the government and private sector to work together to unlock the full potential of the economy. By doing so, Malawi can kupezeka kwa mphamvu (strengthen its economy) and achieve its development goals.

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Vanessa Banda
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