Public sector debt to the banking system fell by K36.7 billion in April to K6.4 trillion while credit to the private sector accelerated to 21.9 percent annual growth.
The Reserve Bank of Malawi(RBM)’s Monthly Economic Review shows net credit to the central government decreased by K36.4 billion to K5.9 trillion, driving the overall debt reduction.
RBM’s net claims on government fell by K139 billion to K2.3 trillion, mainly due to reduced holdings of Promissory Notes and Treasury Notes, which declined by K344.1 billion and K52.4 billion respectively.
However, government deposits at the central bank decreased by K179.2 billion to K444.7 billion, partially offsetting the decline in RBM’s claims.
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Commercial banks increased their net claims on government by K102.6 billion to K3.5 trillion through additional investments in Treasury bills and Treasury notes, which grew by K79.3 billion and K75.6 billion respectively.
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Private sector credit growth accelerated from 17.8 percent in March to 21.9 percent in April, reversing months of deceleration as banks preferred lending to government.
The growth rate remains below the 29.3 percent recorded in 2024.
Monthly private sector credit rose by K45.8 billion to K1.6 trillion, driven by increases in foreign currency loans and individual household loans, which expanded by K11.6 billion and K31.8 billion respectively.
Manufacturing led sectoral credit expansion with K33.6 billion, followed by Community, social and personal services at K17.6 billion.
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Transport, storage and communic a t ions contracted by K8.7 billion while electricity, gas, water and energy fell by K5.33 billion.
Economist Velli Nyirongo said the debt reduction suggests temporary improvement in public sector balance sheets and signals movement towards fiscal consolidation.
He cautioned that government reliance on short-term domestic borrowing remains high, with significant debt maturing between 2025 and 2027.
“The reduction in RBM’s net claims signals a move towards fiscal consolidation, which can help contain inflationary pressures and reduce the risk of crowding out private sector credit.
“While the April debt contraction is a positive development, it does not yet signal a sustained shift in fiscal trajectory,” Nyirongo said.
