The government softened its grip on domestic borrowing in the first quarter of the 2026-27 financial year, evidenced by a comparative surge in borrowing using instruments like Treasury Bills and Treasury Notes.
But Finance Minister Joseph Mwanamvekha attributed the situation to the government’s use of the instruments to service matured debts.
The trend culminated in June, when the government accepted almost all bids submitted, with a total of K319.93 billion raised in applications, representing an overall acceptance rate of 99.44 percent.
The shift reflects growing government reliance on the domestic market for financing during the second quarter of 2026.
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Figures contained in the Bridgepath Capital Limited’s monthly economic reports show that in January, the government rejected the bulk of bids submitted, borrowing just K25.36 billion in Treasury Bills from K466.02 billion provided by lenders, highlighting a success rate of 5.44 percent.
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In February, there were also steep rejections, with the Treasury Bill auctions recording a 72.87 percent rejection rate, while Treasury Note auctions had a 74 percent rejection rate.
By March, the government had started accepting more bids as the Monetary Policy Committee cut the policy rate to 24 percent from 26 percent.
The Treasury Bill rejection rate fell to 31.96 percent, while Treasury Notes had a 58.67 percent rejection rate, awarding a combined K572.58 billion from K964.63 billion applied.
There was a continued ease in April and May, as the government awarded K290.24 billion K376.21 billion in applications, representing an overall rejection rate of just 22.85 percent.
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The 91-day Treasury Bill yield fell from 16 percent in January to 12 percent by June, while the fiscal deficit remained a pressure point, with public debt at K23.9 trillion.
Commenting, Mwanamvekha said the Treasury issued the bills and notes to raise money for maturing debts.
“When we have maturing treasury bills and treasury notes is when we also issue to finance those. In the case of January, it means there were very few maturities, not only maturities,” he said.
Economics Association of Malawi president Bertha Chikadza warned that the near-total acceptance rate now risks reversing gains made in earlier months squeezing private borrowers.
“Moving forward, if the government continues to accept all of the treasuries, we are likely to see an increase in the yield, as the demand now matches the supply,” Chikadza said.
Economist Marvin Banda said the shift was predictable, saying the government has, for now, been rescued by favourable market conditions because banks remain liquid.
“It was always obvious that the government could not sustain abstinence from borrowing. It was a cheap ploy to influence interest rates to go down that was accompanied by fears of domestic debt restructuring, which hasn’t materialized since,” he said
