Malawi’s broad money supply growth has slowed for the third consecutive month, reflecting the impact of tight monetary policy and lingering effects of the 44 percent currency devaluation in late 2023.
Data from the Reserve Bank of Malawi (RBM) shows that annual broad money (M2) growth declined to 33.9 percent in March 2025, down from 37.8 percent in February and 47.8 percent in March 2024.
The deceleration is largely attributed to lower growth in demand deposits, currency in circulation, and foreign currency-denominated accounts.
RBM figures show that demand deposits rose by K590.1 billion in March 2025, down from K630.7 billion in February. Currency in circulation also registered a slower increase of K271.6 billion compared to K298.0 billion in the previous month. Meanwhile, foreign currency-denominated deposits declined by K80.2 billion, widening from a K27.2 billion drop in February.
In contrast, term deposits— which include savings and fixed deposits—showed modest resilience, rising by K586.2 billion in March from K569.6 billion in February. However, their contribution to the overall money supply remained steady at around 14.5 percentage points.
On a monthly basis, broad money rose by 0.7 percent to K5.4 trillion in March 2025. The expansion was driven largely by increased demand deposits and higher currency outside the banking system, which rose by K46.1 billion and K11.5 billion, respectively.
The rise in cash demand was linked to the start of the agricultural marketing season, which traditionally sees rural economies shift toward cash-based transactions.
However, term deposits fell by K13.6 billion during the month, as agro-traders reportedly withdrew funds to finance crop purchases. Foreign currency holdings also declined by K8.2 billion, amid lower external inflows and rising import needs.
The drop in foreign currency deposits raises concerns about Malawi’s external position.
Economists warn that a sustained decline could weaken the country’s ability to meet import demands, especially for fuel, fertiliser, and industrial inputs.
Financial analysts have also noted the shifting composition of Malawi’s money supply as a sign of growing sensitivity to policy signals.
“The continued tightening of liquidity is having the intended effect of slowing demand-side inflation, but we must watch for signs of stress in sectors that rely on working capital,” Scotland-based Malawian economist Velli Nyirongo.
The drop in the money supply will likely excite global financial multilateral institutions such as the World Bank, who had earlier expressed concern about Malawi’s growth in money supply and its potential to worsen inflationary pressures.
In an earlier interview, economics researcher and analyst Exley Silumbu, a former economics lecturer at the University of Malawi, urged the government to contain the growth in monetary supply to ease inflationary pressures on the local economy.
With inflation risks still elevated and demand for liquidity expected to rise as the harvest season peaks, the RBM faces a delicate balancing act between stabilising the currency and supporting economic activity.
