The Reserve Bank of Malawi (RBM) withdrew about K80.6 billion from the financial market through open market operations (OMO) last week.
This is happening at a time the central bank continues to implement a tight monetary policy to contain inflation.
RBM figures, contained in the Financial Market Update by Bridgepath Capital covering the week ending October 23, show that the central bank withdrew K68.5 billion through overnight operations, K10 billion through 62-day agreements and K2.1 billion through 60-day agreements.
The amount applied for, and awarded, was equal across all three tenors, bringing the total to K80.6 billion.
Meanwhile, the central bank did not conduct Treasury Bill auctions for all tenors during the week under review.
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There were also no applications or allotments for Treasury bills, while the two-year Treasury Note attracted applications amounting to K70 million, with no allotment made.
The operation comes as inflation continues to ease, falling to 19.4 percent in September 2026, its first time below 20 percent since May 2022, according to National Statistical Office (NSO) figures.
Despite the declining inflation rate, RBM’s liquidity withdrawal comes against a backdrop of tight monetary conditions, with the central bank maintaining an elevated policy rate, at 24 percent, to contain inflation.
Malawi Economic Justice Network Executive Director Bertha Phiri said the liquidity withdrawal signaled the central bank’s commitment to maintaining a tight monetary policy stance, which could help anchor inflation expectations.
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“By withdrawing money, RBM reduces aggregate demand and slows growth in money supply, which in Malawi has been a key driver of inflation, alongside food and forex pressures. It complements the 24 percent policy rate,” Phiri said.
However, Phiri said the intervention, in the short term, could increase borrowing costs for businesses, particularly small enterprises that depend on commercial bank loans to finance working capital.
However, economist Marvin Banda said the liquidity withdrawal should be assessed against the country’s broader fiscal challenges, arguing that government borrowing had contributed to the pressures the central bank was trying to contain.
“RBM must, therefore, explain whether this withdrawal addresses genuine excess liquidity or merely tightens an already difficult credit environment,” Banda said.
The government projects that headline inflation will decline to 15 percent by the end of 2026, according to the 2026-27 national budget.
However, in its October 2026 World Economic Outlook, the International Monetary Fund projects Malawi’s inflation to average 21.9 percent in 2026 before inching further up to 25 percent in 2027.
