For three consecutive weeks, the Malawi Government has rejected Treasury bills (T-bills) bids in a move fiscal and monetary authorities say is meant to tame appetite for domestic borrowing and prioritise fiscal consolidation and debt sustainability.
Since the onset of this year, government has rejected T-bills bids on January 6 valued at K47.8 billion and also rejected K69.7 billion the following week.
On January 20, government further turned down bids valued at K55 billion, with only K11 billion for the 90-day tenor allotted, in the process pushing the yield rate down to 15 percent from 16 percent while other 182-days and 364-day tenors remained unchanged at 20 percent and 26 percent, respectively.
During last week’s auction, K25.36 billion was raised from applications worth K201.04 billion, resulting in an 87.39 percent rejection rate.
This means that for the past three weeks, government has rejected T-bills bids valued at K348 billion.
In an interview on Friday, Reserve Bank of Malawi (RBM) spokesperson Boston Maliketi Banda said government seeks to reduce its appetite for high borrowing costs amid elevated domestic debt levels at about K14 trillion, which is 65 percent of the total public debt at K22 trillion, an equivalent of 86 percent of gross domestic product (GDP).
He said: “The Government of Malawi has recently signalled a shift in its borrowing strategy, prioritising fiscal consolidation and debt sustainability.
“With domestic debt already at elevated levels, further borrowing at high yields would exacerbate debt servicing costs and strain the national budget.”
Maliketi Banda said by scaling back its participation in high-yield T-bills auctions, the government has effectively reduced demand for high-cost debt, leading to lower yields.
Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamvekha said on Friday that the rejection is a deliberate move to induce a decline in interest rates and reduce domestic borrowing and interest rate payment.
He said: “We are rejecting T-bills bids and we will continue rejecting them. This is meant to cut interest rates, to reduce domestic borrowing and enable banks to increase their lending to the private sector.
“If we reduce borrowing, we will be reducing our debt burden, reduce interest payment and guarantee increased private sector credit, which could spur economic growth.”
Business Partners International country manager Bond Mtembezeka said in an interview on Friday that government’s move is synonymous with the current regime, which targets to lower interest rates and exercise fiscal discipline.
“They have been rejecting higher yields as a way of compelling bidders to reduce their interest rates and this can have a signalling effect on financial markets,” he said
In a separate interview, financial Market Dealers Association president Leslie Fatch said the high rejection of T-bills bids reflects efforts to reduce interests and the possibility of intention to shift towards long-term borrowing.
He said: “Firstly, Treasury’s move would lower interest rates because investors whose bids were rejected could consider reviewing their rates in future bids.
“It may also mean the government wants to focus on long-term borrowing through Treasury notes.”
However, unlike in T-bills, government accepted all 57 bids in all the five categories of Treasury notes, ranging from two to 10 years of maturity during its December 2025 auction, indicating government’s interest in long-term borrowing.
Market analyst Brian Kampanje said the T-bills yield trend could result in a shift towards lending to the private sector as banks will find T-bills less attractive.
“Financial institutions such as banks, insurance companies and pension funds might find government securities less attractive and instead pump in money into the private sector to stir production, create jobs and earn more profits leading to economic growth,” he said.
Commercial banks have this month slightly lowered their base lending rate to 25.2 percent in January 2026 from 25.3 percent last month following a decline in T-bills average yields to 22.68 percent from 23.14 percent due to non-allotment on the 364-day tenor in late December 2025.
In the 2025/26 National Budget, public debt interest is projected at K2.17 trillion, which is 8.4 percent of GDP and 49.2 percent of domestic revenues.
