Money supply growth on the decline—RBM
The tightening of the liquidity reserve requirement (LRR)ratio on domestic deposits has helped to ease money supply growth to 38 percent from 51.3 percent, indicating the market’s positive response, according to the Reserve Bank of Malawi (RBM).
In an interview on Sunday, RBM spokesperson Mark Lungu described the development as positive because excessive money supply growth in an economy is not desirable as it leads to inflationary pressures.

He said: “This was noted by the Monetary Policy Committee at their fourth meeting and that is why the committee resolved to tighten monetary policy through an adjustment in LRR on domestic deposits.
“The reduction in money supply growth is largely attributed to that and it is a good thing for the economy. Ideally, money supply growth should be in line with nominal gross domestic product and it is our expectation that we will get there.”
The RBM Economic Review for November 2024 said the deceleration in the growth of money supply reflects the recent tightening of LRR ratio on domestic deposits from 8.75 percent to 10.75 percent in November 2024.
Reads the review in part: “The outturn reflects favourable base effects, following a strong increase in money supply a year earlier due to the 44 percent devaluation of the kwacha and the tight monetary policy stance implemented by the RBM during the fourth meeting of the Monetary Policy Committee [MPC] earlier in the month.”
The report indicates that demand deposits, currency outside banks and foreign currency denominated deposits registered year-on-year growth of K637.4 billion, K184 billion and K16.5 billion compared to K733.9 billion, K234.9 billion and K200 billion in October 2024, respectively.
In an interview on Sunday, capital market analyst Cosmas Chigwe said despite being inflationary, an increase in available capital could spur economic activities, promoting growth and potentially leading to job creation and higher gross domestic product.
He advised investors in the money market to assess the risks associated with inflation and interest rate changes, observing that a high growth rate in money supply usually signals future volatility, influencing the demand for short-term versus long-term investments.
“The rise in foreign currency denominated deposits can affect the exchange rate dynamics. If these deposits are the result of increased foreign investments or remittances, it could strengthen the local currency,” said Chigwe.
The second MPC of 2024 kept the policy rate, the rate at which commercial banks borrow from the central bank, at 26 percent, maintained the LRR ratio for foreign currency deposits at 3.75 percent but raised the LRR ratio for domestic currency deposits by 100 basis points to 8.75 percent.
During its fourth meeting, MPC also raised the LRR ratio for domestic deposits by 200 basis points from 8.75 percent to 10.75 percent while maintaining the ratio for foreign deposits at 3.75 percent.