Creditors, including commercial banks, and investors are exploring alternative avenues to push funds as the government continues narrowing the level of its domestic borrowing. The government— which was once touted as the main consumer of domestic credit—has, in recent months, scaled down its borrowing using instruments such as Treasury bills (TBs).
For instance, figures show that, in January, Treasury bills securities auction applications reached K466.02 billion, of which the government only borrowed K25.36 billion. This is compared to K150.88 billion the government borrowed in December 2025 from offers worth K180.89 billion. At the February 10, 2026 Treasury bills auction, the Reserve Bank of Malawi (RBM) raised funds exclusively through the 91-day instrument, with the average yield dropping to 12 percent from 15 percent in the previous sale.
The central bank accepted only K12.4 billion out of K179 billion offered by investors, signalling tighter control of interest costs and reduced reliance on short-term debt. Meanwhile, no allocation was made on the 182-day and 364-day bills.
The latest outcome follows a series of January auctions in which RBM either rejected all bids or remained highly selective. RBM also rejected bids worth K145.58 billion applied by investors for all three securities at a Treasury bills auction held during the week ending February 6, 2026
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In a response to a questionnaire, Bankers Association of Malawi (Bam) President Philip Madinga said excess liquidity in the banking sector was prompting financial institutions to explore alternative uses of funds.
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“These include expanding credit to productive sectors of the economy, supporting private sector growth initiatives and strengthening partnerships in infrastructure and trade finance,” Madinga said. He said while this may temporarily limit the uptake of funds by the government, it also signalled a commitment to prudent fiscal and monetary management. Madinga said banks continued participating actively in government securities auctions and respected RBM’s role in managing monetary policy and public debt.
In a Facebook page post, investor Benedicto Nkhoma said, due to the trend, investors must rethink their strategies. “Short-term interest rates are likely to continue softening, banks will earn less from Treasury bills and deposit rates may slowly come down,” Nkhoma said. Financial Dealers Association of Malawi (Fimda) President Leslie Fatch described the development as part of the government’s broader objective to gradually bring down interest rates, with a long-term target of reducing the policy rate to 12 percent by 2028.
He said while some investors had adjusted by lowering their bid rates, a significant portion of the market continued to hold out for higher returns, resulting in repeated rejections. Economics Association of Malawi President Bertha Bangara Chikadza said the rejection of longerdated bills could signal early steps toward restructuring domestic debt, particularly in terms of maturity and borrowing costs.
“Avoiding longer maturities such as the 182-day and 364day Treasury bills could be a starting point toward domestic debt restructuring,” Chikadza said. She said, given the current liquidity levels and limited financial instruments, the Malawi Stock Exchange remained an obvious alternative for investors who are seeking returns. In an earlier interview, Treasury spokesperson Williams Banda said the decision to limit borrowing was driven by reduced funding requirements and efforts to cut interest payments.
