Emeritus Reinsurance Malawi says the Reserve Bank of Malawi’s (RBM) decision to reject high‑interest Treasury bill (T-bills) bids has sent ripples through the financial system as government seeks to curb rising public debt and lower borrowing costs.
The country’s sole resident reinsurer says the immediate effect has resulted in a sharp fall in yields, unsettling banks, insurers and investors in the process.
In an interview on Friday, Emeritus Reinsurance Malawi general manager Edward Takondwa Harold said the shift is more than a passing inconvenience as it strikes at the heart of its balance sheet.
“The math is simple but brutal. This calls for the immediate need to refocus investment strategies to achieve targeted returns and liquidity,” he said
Harold said the blow has been compounded by the 16-counter Malawi Stock Exchange, which is bearish after a bullish 2025.
But he insisted the company remains resilient, adding: “Despite these headwinds, the company remains strong and resilient to weather the storm and deliver stellar services to stakeholders.”
Harold said survival depends on three scenarios, adding that first is the need for investment diversification, adding that portfolios should balance low‑yield government securities with higher‑risk, higher‑return assets such as equities and property.
He also said there is need for underwriting discipline to ensure correct risk pricing and strict enforcement of the newly gazetted cash‑and‑carry premium payment system.
“Third, it is operational efficiency and there is need for tight cost control to protect the bottom line in an inflationary environment,” said Harold.
Since the onset of this year, the Malawi Government has been rejecting T-bills bid and in some cases reducing the level of borrowing in a move fiscal and monetary authorities say is meant to tame appetite for domestic borrowing and prioritise fiscal consolidation and debt sustainability.
In an earlier interview, 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 the country’s gross domestic product (GDP).
“The Government of Malawi has recently signalled a shift in its borrowing strategy, prioritising fiscal consolidation and debt sustainability,” he said, adding that with domestic debt already at elevated levels, further borrowing at high yields could worsen 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.
Financial Market Dealers Association president Leslie Fatch earlier said government’s move reflects efforts to reduce interests and the possibility of intention to shift towards long-term borrowing.
Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamvekha is quoted by The Nation as having said this a deliberate move to induce a decline in interest rates and reduce domestic borrowing and interest rate payment.
In March this year, the RBM cut the policy rate, the rate at which commercial banks borrow from the central bank as a lender of last resort, by 200 basis points to 24 percent.
Over the past five months, commercial banks have also been easing their reference or lending rates from 25.2 percent in February this year to 20.80 percent in May.
