The government has set an ambitious target to more than halved the policy rate from the current 26 percent to 12 percent by 2028, signaling a deliberate push to ease the cost of borrowing and revive private-sector investment.
At present, commercial lending rates hover between 30 and 35 percent, a burden that has forced many firms and individuals to shelve expansion plans and slowed new business formation.
In its Economic and Fiscal Policy Statement 2026, the government reiterates its commitment to taming inflation and achieving a single-digit medium-term inflation goal.
To accelerate the restoration of price stability, authorities say the monetary policy stance will remain contractionary for now.
“The policy rate will be reduced from 26 to 12 percent by 2028, whereas the monetary policy framework will continue to be forward-looking, guided by the medium-term inflation objective.
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“The policy stance is consistent with consolidating the disinflation process while supporting medium-term growth,” the statement reads.
The administration also pledges to keep the interbank rate closely aligned with the policy rate to strengthen the transmission of monetary policy across the financial system.
Periodic reviews of the Policy Rate and Liquidity Reserve Requirement are planned, taking into account inflation trends, exchange-rate movements and fiscal conditions.
Improved coordination between fiscal and monetary authorities, the statement adds, will be essential to securing and maintaining macroeconomic stability.
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Currently, high cost of capital is seen as one of the major obstacles of doing business in Malawi.
Speaking in Blantyre during the Reserve Bank of Malawi Monetary Policy Committee Technical Meeting in August, Malawi Confederation of Chambers of Commerce and Industry business-environment director Lucky Mfungwe said lending conditions in Malawi remain far tighter than in neighbouring economies.
He noted that while Malawi’s policy rate sits at 26 percent, Tanzania’s stands at 5.75 percent, Zambia’s at 14.5 percent and Mozambique’s at 10.25 percent.
This disparity, he said, has pushed local lending rates to an average of 30 to 35 percent, restricting credit access for businesses, particularly small and medium enterprises that employ over 60 percent of Malawi’s workforce.
