Policy Watch

Malawi Monetary Policy Statement


The Reserve Bank of Malawi decided to raise the policy rate to 27% and maintain the liquidity reserve requirement at 7.5%.

Malawi Monetary Policy Statement


Reserve Bank of Malawi kept its key rate unchanged at 25%.

Malawi Monetary Policy Statement


Reserve Bank of Malawi decided to maintain its key policy rate unchanged at 22.5%

Malawi Monetary Policy Statement


The Reserve Bank of Malawi decided to decrease its key rate by 2.5% to 22.5% as of July 9th 2014.

Debt vs GDP / Bonds vs bills

All Data - Malawi

Year 2012 2013 2014 2015 2016 2017
GDP (billions US$) 5.63 4.52 5.97 - - -
Total Outstanding Amount (Billion US$) 0.13 0.24 - - - -
Bonds 0.00 - - - - -
Bills 0.13 0.24 - - - -
Outstanding Amount/GDP (%) 2.29% 5.42% 0.00% - - -

Country Summary

The financial sector in Malawi is improving, although it registered a slight decline between 2012 and 2013 (from 6.1% to 5.2%). The financial inclusion rate went from 45% in 2008 to 54% in 2013. Credit costs are high (the Bank rate was 25% in 2013) and the bulk of the loans go to the government or to government entities.

The banking sector was composed of 13 licensed commercial banks in 2013.

The Reserve Bank of Malawi (RBM)is the regulatory and supervisory authority of the banks.

The insurance industry is underdeveloped. There are legal challenges to implement licensing and registration guidelines for entry in the pension industry. In March 2011, the Parliament enacted a new bill enforcing a mandatory pension plan for all Malawians.

The local stock exchange is small and inactive. In 2013, there were 13 companies listed on the Malawi Stock Exchange (MSE). The Capital Market Development Act of 1990 and the Capital Market Development Regulations of 1992 form the backbone of the regulatory framework of the capital markets.

The domestic debt market was launched in 2011. The government uses this market to finance its infrastructure projects. A recent trend has been an increase in foreign participation, a trend that can be observed in other southern African capital markets.

Monetary policy & Public debt

The Reserve Bank of Malawi's (RBM) goal is to maintain price stability. Reserve money is used as the operational target and a Monetary Policy Committee meets once every quarter to determine the level of the bank rate and other key monetary aggregates. After a peak of 37.9% in Feb 2013, inflation was reduced to 28.1%.

Malawi's debt management strategy is guided by the Public Finance Management Act of 2003, which sets the ceiling on total public debt at 25% of GDP. In 2013, domestic debt was 15.02% of GDP.

Currently, Malawi’s domestic debt is mostly short-term; 61.1% of its domestic debt is made of T-bills. The government is aware that the predominance of short-term securities poses refinancing threats. As such, it is trying to restructure its debt portfolio by lengthening the maturity.

Market Structure

Market Participants


The Reserve Bank of Malawi (RBM) is the principal issuer of Treasury bonds and Treasury bills on behalf of the Government of Malawi.

Corporate entities may also issue debt to raise capital.

Investor base

For the period ending June 2012, financial institutions were the major holders of domestic debt with 91% (74% of it was held by the RBM).

Other investors include pension firms and foreign investors.

Other intermediaries

Primary trades are carried out by Stockbrokers Malawi Ltd, discount houses, Trust Securities Ltd, CDH Stockbrokers, FDH Stockbrokers and African Alliance Limited.

Instruments issued

Treasury bills and Notes

Treasury bills are offered in three maturities: 91-d, 182-d and 364-days.

Maturities range for Treasury Notes are between 2, 3, 4 and 5 years.

Time to maturity and average yield

Between 2012 and 2013, average yields across all maturities (91-d, 182-d, 364-d) increased: from 14.25% to 28.34% for the 91-d, from 15.86% to 30.94% for the 182-d, from 17.62% to 33.52% for the 364-d.

Primary market and secondary market

Primary market

Treasury securities auctions are conducted every Tuesday. Auctions are announced in press releases and published in the newspapers.

The minimum amount to bid in T-bills is K10,000 (K5,000 for non-competitive bids) and any subsequent amounts must be in multiples of K1,000. For the period 2012-13, subscriptions for treasury bills increased by 107.86%. Net issuance of T-bills were valued K68.2 billion.

Secondary market

OTC vs. exchange listed

The secondary market for bonds is very illiquid: the offer of bonds is limited and the majority of investors prefer a “buy and hold” strategy.

Clearing, settlement and custody

The clearing and settlement is handled by licensed brokers or dealers. Regulations governing these procedures are contained in the Capital Market Development Act under the enforcement and supervision of the RBM.

The funds arising from securities are however physically held by custodians. The latter are normally vetted commercial banks approved by RBM to handle these types of funds.

Recent Developments

As a response to the changing macroeconomic environment, the RBM enhanced the independence of its monetary policy function and raised the statutory limit on the domestic borrowing.

Investor Protection

Its  Malawi is ranked 80 out of 189 with regard to investor protection in the 2014 Ease of Doing Business (World Bank). Its  Constitution prohibits expropriation of an individual's property without due compensation. Additionally, Malawi has entered into bilateral investment protection and promotion agreements with a number of countries thus giving assurances to investors on the security of their investments.

Guide to Buying Bonds

Procedures for market participation

Investors can present their bids directly to one of the branches of the Central Bank. Prospectus and application forms for government securities are obtained from the Reserve Bank of Malawi (RBM).

Settlement cycle

Treasury bonds are settled on a T+7 basis.


Interest income in excess of K10,000 is taxable at the appropriate rate according to the Income Tax Act. However, the First Schedule of the Taxation Act exempts holders of government securities to be taxed.

Capital gains on the other hand are taxed at the ordinary income tax rate up to 100% of the gain but there are provisions for inflation adjustment. Capital gains can also be subdivided depending on whether capital allowances were available on the assets. 

Market restrictions

Openness to international investors

Malawi Stock Exchange (MSE) regulations limit participation of an individual foreign portfolio investor to a 10% maximum of any class of security and limit total foreign investment in any portfolio to a maximum of 49%.

Capital controls

Capital accounts were liberalized in the 1990s. This was followed by the FX and the exchange rate liberalization.

Restrictions on foreign exchange and profit repatriation

The foreign exchange market is fully liberalized.

2011, the RBM had to exert greater foreign exchange controls in an attempt to slow depletion of foreign exchange reserves.

There are no restrictions on repatriation of dividends, lease repayments and interest. Capital and loans can be freely remitted as long as they are obtained from foreign sources and registered with the RBM.

Credit rating

Malawi was last rated in 2009 by Fitch. The credit rating agency assigned a rating of B- to the local currency issuer default. S&P and Moody’s have not yet rated Malawi.

List of Primary Dealers 

The Malawi market comprises five primary dealers:

National Bank of Malawi

Standard Bank Malawi

NBS Bank

First Merchant Bank

Trust Securities

The Malawi Stockbrokers Ltd. is the institution authorized by the government to handle the secondary market trading.