By Kingsley Jassi
Industry players and consumers should brace for tough times, including elevated prices, ahead, as the Reserve Bank of Malawi (RBM) spells a number of risks that economists think will make life hard.
The recent decision by the Monetary Policy Committee to raise the Lombard Rate from 0.2 percentage points to 2 percentage points means the cost of borrowing will be high as the central bank attempts to manage liquidity amid inflation risk.
According to economist Velli Nyirongo, the situation appears delicate as businesses that depend on imported materials and fuel will suffer high cost of operations, limiting expansions and entry of new businesses, while consumers should brace for tough times.
The current trend of inflation, which dropped in the third quarter to 20.1 percent from 22.9 percent, will not suppress the cost of living.
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In addition, the move by the central bank will have an impact, albeit a limited one.
“This may help contain inflation risks, but its direct impact is likely to be limited, as inflation is also being driven by external factors such as high fuel prices, imported costs and potential weather-related food shortages. The decision therefore supports the fight against inflation, but it will not be enough on its own,” Nyirongo said.
Coordination with the government will also be important, according to Nyirongo, particularly in managing food supply risks, supporting agricultural production and maintaining fiscal discipline.
The MPC assessment sees that annual broad money growth moderated to 19.7 percent in the third quarter of 2026 from 21.2 percent in the previous quarter, and from 51 percent a year earlier.
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“Private sector credit growth slowed to 21.7 percent from 31.3 percent while banking system liquidity tightened, with excess reserves averaging K82.4 billion per day from K191.3 billion per day,” the MPC statement reads.
This suggests suppressed inflationary pressure from the money supply factor, which had been a prominent cause of high inflation.
However, with recourse to the Lombard facility rising to an average of K72.3 billion per day, from K25.3 billion per day, there is a risk to money supply growth.
