Malawi central bank raises borrowing rate

The Reserve Bank of Malawi (RBM) has raised the Lombard Rate from 0.2 percentage points to 2 percentage points, increasing borrowing costs. This move aims to manage liquidity and combat inflation risks, which economists warn will lead to elevated prices and tough times for consumers. Businesses relying on imported materials and fuel will face higher operational costs, potentially limiting expansion and new ventures.

Economist Velli Nyirongo stated that while the rate hike may help contain inflation, its direct impact will be limited due to external factors like high fuel prices and imported costs. He stressed the need for government coordination in managing food supply, supporting agriculture, and maintaining fiscal discipline to address inflation effectively. The Monetary Policy Committee noted that annual broad money growth slowed to 19.7 percent in the third quarter of 2026.

Banking system liquidity tightened, with excess reserves averaging K82.4 billion per day, down from K191.3 billion. However, recourse to the Lombard facility rose to an average of K72.3 billion daily, posing a risk to money supply growth. Inflation dropped to 20.1 percent in the third quarter from 22.9 percent in the previous period.

Why it mattersMalawians will face higher prices and increased costs for borrowing money due to the central bank's policy change.

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