At a high-level Monetary Policy Technical Forum in Lilongwe, economists and policymakers endorsed the Reserve Bank of Malawi’s (RBM) decision to maintain the policy rate at 26%, amid signs of easing inflation.
While the central bank emphasised a cautious monetary approach, participants stressed that macroeconomic recovery hinges on broader reforms, coordinated fiscal measures, and long-term structural transformation.
Chakudza Linje, Director of Financial Markets at RBM, outlined the rationale behind the rate hold, citing persistent inflation risks despite positive trends.
Inflation fell from 30.7% in February to 27.1% in June, yet rising food costs and external shocks remained significant concerns. She warned that premature easing could reverse fragile gains and destabilise the economy.
Linje noted that RBM’s monetary operations are increasingly aligned with other sectors. She stressed the need for a cross-sectoral approach to managing inflationary pressures, highlighting the importance of collaboration with agriculture, mining, and manufacturing to improve foreign exchange reserves and economic resilience.
Grace Kumchulesi of the National Planning Commission underscored that for monetary policy to have a meaningful impact, it must be accompanied by structural reforms.
She emphasised investment in productive sectors as essential to achieving the goals of Malawi 2063, particularly in fostering export growth and reducing the investment risk environment.
Kumchulesi also championed the implementation of a developmental state model, calling on the government to play a proactive role in de-risking the private sector.
According to her, this strategy is key to unlocking long-term capital flows and accelerating the First 10-Year Implementation Plan of Malawi 2063.
The Economics Association of Malawi (ECAMA) echoed the RBM’s cautious stance. Executive Director Esmie Kanyumbu highlighted that while inflation is declining, looming food shortages and global uncertainties justify a hold on the policy rate. She warned that relaxing monetary conditions too early could reignite inflation.
Kanyumbu further urged better fiscal-monetary coordination, particularly around public spending. She emphasised that managing fiscal pressures and redirecting resources toward export-driven sectors is vital for stabilising prices and supporting sustainable growth.
The forum acknowledged that Malawi’s recovery remains delicate despite recent improvements. Economic growth is projected to rise to 2.8% in 2025 from 1.7% in 2024, supported by favourable agricultural conditions and the government’s focus on agriculture, tourism, mining, and manufacturing under the ATM-M strategy.
Exchange rate stability in the second quarter of 2025, buoyed by seasonal export inflows, offered temporary relief. However, vulnerabilities remain, including volatile fertiliser prices, budget deficits, and local food supply challenges, all of which could undermine ongoing stabilisation efforts.
The RBM concluded by reaffirming its commitment to evidence-based policy and proactive monitoring of macroeconomic trends.
The central bank’s next Monetary Policy Committee meeting, scheduled for October 29–30, will offer another critical opportunity to assess progress and adjust the course if needed.
