Growth in Malawi’s money supply slowed sharply in October 2025, even as economists warned that inflation pressures are being driven more by food and exchange-rate shocks than by liquidity alone.
Reserve Bank of Malawi (RBM) figures show that the annual growth rate of broad money (M2) eased to 42.7 percent in October from 51.0 percent in September and 51.8 percent in October 2024. On a month-on-month basis, M2 contracted by 2.7 percent—falling by K199.8 billion to K7.2 trillion.
The reversal was driven mainly by a drop in highly liquid balances. Demand deposits fell by K231.4 billion to K2.6 trillion, while currency outside the banking system declined by K55.9 billion to K1.2 trillion. In contrast, term deposits rose by K67.7 billion to K2.7 trillion and foreign-currency deposits increased by K19.8 billion to K667.9 billion.
According to RBM, the rise in terms of deposits partly reflects farmers mobilising savings ahead of the 2025/26 planting season—an indication that some liquidity is being parked in longer-tenor instruments rather than circulating as cash.
A review of the first 10 months of 2025 shows that, despite the October pullback, money supply has expanded significantly over the year. M2 stood at K5.37 trillion in January, with an annual growth rate of 40.8 percent and marginal month-on-month growth of 0.6 percent.
Through the first-quarter, broad money hovered around K5.4 trillion as annual growth eased to 33.9 percent in March and month-on-month changes remained subdued, at under one percent.
From April, however, liquidity accelerated. M2 jumped to K5.78 trillion in April and K6.15 trillion in May, before climbing to K6.72 trillion in June and K7.02 trillion in July. The fastest monthly increase was recorded in June, when M2 grew by 9.3 percent, followed by 7.0 percent in April and 6.4 percent in May.
By August, broad money had reached K7.23 trillion and K7.42 trillion in September, with annual growth peaking at 52.1 percent before slipping back to 51.0 percent. October’s contraction marks the first meaningful pullback in liquidity growth after six consecutive months of expansion.
While the RBM has tightened policy in a bid to contain inflation, some economists argue that Malawi’s price dynamics are being driven more by food and exchange-rate shocks than by pure monetary expansion.
Former RBM governor Elias Ngalande told a panel discussion held on the sidelines of the launch of the 2025 issue of World Bank’s Public Expenditure Review that maize prices remain the single most important driver of inflation in Malawi.
“In Malawi, the major driver of inflation is maize prices, not the money supply as believed by most economists,” he said, adding that while liquidity growth plays a role, its impact is outweighed by food price movements.
University of Malawi academic Winford Masanjala cited empirical data suggesting that about 52 percent of Malawi’s inflation is explained by maize price changes, with most of the remainder linked to exchange-rate pass-through.
“Data shows that 52 percent of inflation is driven by maize prices. The rest is inflation from exchange rate fluctuations,” he said, questioning whether very high interest rates are appropriate when the central government—“the main stakeholder”—is also the largest borrower in the system.
The divergence between slowing money-supply growth and persistent price pressures leaves policymakers facing a complex trade-off. While the RBM appears to be reining in liquidity toward the end of 2025, analysts argue that durable disinflation will depend as much on stabilising maize supplies and the kwacha as on managing broad money.
