Financial Market Dealers Association (FImda) says the persistent money supply growth needs to be controlled to avoid negatively impacting the country’s runaway inflation.
In its analysis after the Reserve Bank of Malawi (RBM) Economic Review indicated that money supply grew to 52.1 percent, Fimda said there is need to mop out excess money on market.
Fimda president Leslie Fatchi attributed this development to increased fiscal spending, which resulted in fiscal deficit doubling to K1.44 trillion between January and August this year.
He said: “With a recorded increase in fiscal deficit to K266.7 billion from K92.5 billion in the previous month, cumulatively, we have seen the fiscal deficit standing at K1.44 trillion from January to August 2025 compared to K769.2 billion during the same period in 2024.
“This suggests increased fiscal spending which leads to increased money supply in the economy. This is heightened in our case by the shortage of goods due to forex challenges and low production capacity.”
Fatchi said coupled with the active trading of agricultural produce and subsequent spending of proceeds, it means there is more money circulating in the economy, which turns out to be inflationary.
In a separate interview, Economics Association of Malawi president Bertha Bangara Chikadza said the increasing money supply could make it difficult for authorities to achieve price stability.
She said: “While in some instances money supply growth can support economic activity, in an economy such as Malawi’s, it fuels inflationary pressures, especially in an environment where exchange rate remains constrained and supply-side bottlenecks persist.
“When more money circulates without corresponding increases in goods and services, aggregate demand exceeds supply which leads to higher prices. This makes it more difficult for authorities to achieve price stability.”
In the report, RBM said the increase was driven by robust growth in term deposits, demand deposits and foreign currency deposits, which increased by K125.8 billion, K107.4 billion and K484.9 million respectively, a situation attributed to increased government borrowing.
Reads the report in part: “This [the growth] was mainly on account of net credit to government. The contribution of net credit to central government to the annual growth rate of money supply increased.”
University of Malawi macroeconomics lecturer Edward Leman is quoted as having highlighted that the high money supply growth is due to increased government borrowing.
“In simple terms, too much money chasing too few goods leads to higher prices. Key factors behind this rise include increased government expenditure and borrowing as well as higher household and business spending.”
“In theory, money supply growth can stimulate production as firms respond to rising demand. However, in our context where supply has consistently been weak, this increase in money supply mainly fuels demand and creates inflationary pressures.”
Scotland-based Malawian economist Velli Nyirongo warned that the country risks exacerbating rising prices if authorities fail to match the growth in money supply with increased production.
Inflation rate was recorded at 28.7 percent in September 2025 with RBM forecasting the rate to average 28.5 percent by end this year.
