In modern economic systems where governments and borrowing are like conjoined twins, it is a rare spectacle to see the otherwise borrowing-happy Malawi Government turning down “offers” for more loans using instruments such as Treasury Bills (T-Bills).
To money market investors, 2026 might have started on a rough note as for three consecutive weeks in January, the Malawi Government—the readily available borrower— rejected T-bills bids in a move fiscal and monetary authorities have opined is meant to tame appetite for domestic borrowing and prioritise fiscal consolidation and debt sustainability.
It started on January 6 when government rejected T-bills bids valued at K47.8 billion before turning down K69.7 billion offers the following week. Come January 20, the government further said no to bids valued at K55 billion, taking only K11 billion for the 90-day tenor T-bill, in the process pushing the yield rate down to 15 percent from 16 percent.
On the other hand, yields for the 182-day and 364-day tenors remained unchanged at 20 percent and 26 percent, respectively.
Cumulatively, during the first three weeks of January government rejected T-bills bids valued at K348 billion.
The trend has extended to February as last week, the government raised K37.1 billion against total applications worth K183.26 billion, representing a 79.75 percent rejection. In the process, yields on 91-day T-bill declined to 12 percent from 15 percent the previous week while yields for the 182-day tenor and 364-day remained unchanged at 20 and 26 percent, respectively.
The Ministry of Finance, Economic Planning and Decentralisation aka Treasury is yet to give an explanation, but we can only speculate or use economic theories to ascertain what could be the justification or indeed the end game.
Besides taxes and other non-tax revenues, governments use borrowed funds to finance deficits, infrastructure projects and to stimulate the economy. There are several reasons that can influence a government’s loss of borrowing appetite, including avoidance of high interest payments that crowd out the private sector as we have experienced in Malawi in recent years with interest rates hovering around 30 percent-plus fuelled by excessive government borrowing.
Malawi’s total public debt stock now stands at K22.4 trillion or 89 percent of its gross domestic product (GDP) from K4.76 trillion or 54 percent of GDP in 2020. The debt stock was worsened by two devaluations of the kwacha, first by 25 percent in May 2022 and later 44 percent in November 2023 which impacted on the kwacha value of the loans.
Treasury data show that between 2020 and 2025, the bulk of the borrowed money was spent on recurrent expenditures such as debt servicing and salaries rather than developmental or capital spending, with wages and debt servicing swallowing 90 percent of the budget.
Further, governments may also cut on borrowing to comply with conditions set by global lenders such as the International Monetary Fund (IMF).
Investor Benedicto Bena Nkhoma, writing on Facebook, argued that the developments, to individual investors, reflect a stabilisation season where they should reposition their money.
What should you do? Nkhoma advises that you should avoid long-term expensive loans, desist from locking yourself in high-interest consumer debt and, above all, avoid upgrading cars simply because maize prices or food inflation has dropped because “kwacha stability is still fragile”.
How did the Malawi Government get to this point where the borrowing appetite appears to be waning?
I would attribute the scenario to several factors, including two communications from the Accountant General and the Secretary to the Treasury (ST) in January to the Bankers Association of Malawi (BAM).
In a January 28 2026 letter to BAM, Accountant General Sungani Mandala stressed the need for commercial banks to comply with transferring of funds from government revenue collecting accounts to corresponding holding accounts at the Reserve Bank of Malawi (RBM) as per the memorandum of understanding between government and commercial banks on revenue management.
Next, on January 29 2026, the ST Cliff Chiunda also wrote BAM requesting for information on bank balances in accounts State-owned enterprises hold in commercial banks.
The information was to include deposit balances in current, savings and foreign currency denominated accounts as well as loans, overdrafts and letters of credit.
To a greater extent, it is a major reserve money move despite the fact that the motive was different. One financial market analyst viewed the arrangement as having similar consequences as raising the liquidity reserve requirement, the mandatory percentage of deposits commercial banks deposit with the central bank without earning interest.
In the end, the money market will feel it as we have already seen with the dropping interest rates, especially on shorter-term T-bills yields.
For a long time, money supply growth has been a problem. Compliance to the arrangement could also help in channelling loanable funds to the private sector, much better than raising interest rates.
That said, the success of the whole arrangement requires discipline from RBM in observing the credit ceilings as set by the law instead of using the available resources as it pleases. Kumangomwaza.
In other words, having the resources in holding accounts at RBM gives the government direct access such that it may not need to borrow hugely from the domestic market. This could be one step towards taming public debt if done with caution.
It is just a matter of time before lending rates could come down in the short to medium-term
