Malawi central bank raises borrowing costs

The Reserve Bank of Malawi (RBM) has raised its Lombard Rate from 0.2 percentage points to 2 percentage points, increasing borrowing costs for businesses and consumers. This move by the Monetary Policy Committee aims to manage liquidity amidst inflation risks, with economist Velli Nyirongo warning of tough times ahead. Businesses relying on imported materials and fuel will face higher operational costs, potentially limiting expansion and new ventures.

Nyirongo stated that while the rate hike may help contain inflation risks, its direct impact will be limited because external factors like high fuel prices and imported costs also drive inflation. He emphasized the need for government coordination on food supply, agricultural production, and fiscal discipline to support the fight against rising prices. The current inflation rate dropped to 20.1 percent in the third quarter from 22.9 percent.

The RBM's Monetary Policy Committee noted that broad money growth slowed to 19.7 percent in the third quarter of 2026, down from 21.2 percent in the previous quarter and significantly lower than 51 percent a year earlier. Private sector credit growth also slowed to 21.7 percent. However, the use of the Lombard facility rose to an average of K72.3 billion per day, posing a risk to money supply growth.

Why it mattersMalawians will face elevated prices and higher borrowing costs due to the central bank's decision to increase the Lombard Rate.

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