Commercial banks have, effective January 6, 2026, revised the reference rate to 25.2 percent, from 25.3 percent in December 2025, representing a 0.1 percentage point decline.
The commercial bank reference rate, also known as the benchmark lending rate, is used by banks as a guide for setting lending interest rates.
In separate announcements published on their official social media platforms and local newspapers, the high street banks in the country confirmed the development.
Commenting on the development, Financial Market Dealers Association (Fimda) President Leslie Fatch said the slight decline was largely technical rather than a reflection of changing market conditions.
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He said although the reference rate edged lower, actual market rates remained unchanged during the month.
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“The drop is informed by a reduction in the all-type Treasury Bill rate, which carries a 10 percent weight in the calculation of the reference rate.
“The drop was more on the technical side than market conditions, as all the auctions conducted during the month were closed at the same rates as the previous month, with the difference being that other Treasury Bill tenors were not auctioned,” Fatch said.
Looking ahead, Fatch said movements in the reference rate will continue to depend largely on its key components, particularly the Lombard rate and the overnight interbank rate.
“The Lombard rate takes the biggest weight, at 64.8 percent, followed by the overnight interbank rate at 25 percent, while the all-type Treasury Bill rate contributes 10 percent,” he said.
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He added that the policy rate, which guides the Lombard rate, and liquidity levels in the banking system, which influence the overnight interbank rate, would remain the main drivers of future movements in the reference rate.
Bankers Association of Malawi President Philip Madinga also attributed the reference rate cut to a drop in Treasury Bill yields.
“The all-type average yield decreased to 22.68 percent from 23.14 percent, due to non-allotment on the 364-day tenor (26 percent yield) in late December 2025. The reference rate, reviewed monthly, aligns with economic indicators like inflation, liquidity, and deposit costs,” Madinga said.
According to Madinga, the reference rate cut slightly eases loan servicing for clients and signals modest easing in cost-of-funds and market conditions.
“As the benchmark for loan pricing, even small changes influence lending rates and credit costs,” he said
Throughout 2025, Malawi’s commercial bank reference rate fluctuated slightly but remained elevated, largely staying within the 25.10 percent to 25.40 percent range.
For example, banks maintained the reference rate at 21.1 percent from February 2025 before increasing it to 25.20 percent in April.
The rate was further adjusted upwards to 25.40 percent in August, before easing to 25.30 percent in September, where it remained for the rest of the year.
Meanwhile, the Monetary Policy Committee of the Reserve Bank of Malawi maintained the policy rate at 26 percent throughout 2025, reflecting a tight monetary stance aimed at stabilising the economy amid persistent challenges, including high inflation, which remained well above the target during the year.
