Malawi Keeps Key Policy Rate for 5th Meeting

The Reserve Bank of Malawi cut its policy rate by 200 basis points to 24% during its March 2026 meeting, marking the first rate change in almost two years. Policymakers said the move reflects a gradual decline in inflation while maintaining a tight monetary stance aimed at steering inflation toward the medium-term target of 5%. Headline inflation dropped to 27.7% in Q4, down from 28.1% in the previous quarter, and further declined to 24.9% in January 2026, largely due to lower food prices following government measures to boost maize supply. However, non-food inflation remains elevated, driven by higher fuel and electricity costs linked to rising production and import expenses. The central bank projects economic growth to accelerate to 3.8% in 2026 from 2.7% in 2025, supported by stronger activity in agriculture, tourism, mining, and manufacturing. Authorities are also seeking a new IMF support program as public debt exceeds 90% of GDP and foreign exchange shortages persist.

The Reserve Bank of Malawi maintained its benchmark lending rate at 26% on May 8, 2025, marking the fifth consecutive hold since February 2024. Officials judged the existing monetary stance to be appropriately restrictive, despite concerns over fiscal slippage and declining farm output. The country’s inflation rate has been persistently above 30%, underscoring persistent price pressures due to severe shortages of dollars. Meanwhile, the central bank lowered its economic growth forecast for this year to 3.2%, down from 4% projected in January.