Interest Rate Cut: What It Means for Ordinary Malawians
When news came out that the Reserve Bank of Malawi had reduced the policy interest rate from 26 percent to 24 percent, many ordinary Malawians did not immediately understand what it meant.
At the Area 25 market in Lilongwe, 28-year-old watermelon seller Mike Chikopa was packing his fruits after a slow day. He had managed to sell only one watermelon for K15,000 the whole day. When asked about the decision by the Monetary Policy Committee (MPC), he said he had never heard about it and did not know how it affects his life.
The policy rate is the interest rate that guides how banks charge people when they borrow money.
Before the change, the rate was 26 percent, which pushed commercial bank lending rates to around 37 percent. This made loans very expensive, so many businesses and individuals stopped borrowing money.
When people do not borrow money, less money moves in the economy. As a result, businesses sell less, and traders like Chikopa struggle to find customers.
The Reserve Bank of Malawi reduced the rate because inflation is slowly coming down.
Inflation — the rate at which prices increase — is currently 24.9 percent, lower than previous years. It had reached over 32 percent in 2024 before falling to about 28 percent in 2025.
Economists say the drop is mainly because more food is now available in the country, which has helped reduce food prices.
If the reduction works as expected:
- Loans may slowly become cheaper
- Businesses may start borrowing again
- More investment and production may happen
- Some prices could stabilize over time
The Bankers Association of Malawi says the move is a good step that could make it easier for businesses to borrow money and grow.
Association president Phillip Madinga said banks are already preparing to increase lending to the private sector.
However, economists warn that the situation is still fragile.
The president of the Economics Association of Malawi, Bertha Bangara-Chikadza, says the central bank is being careful because:
- Prices of many non-food items are still rising
- Foreign currency shortages continue
- Fuel prices have increased due to tensions in the Middle East
These factors could still push prices higher again.
For traders like Chikopa, the biggest issue remains low customer buying power.
He says years ago he used to sell up to 300 watermelons a day. Now he sometimes sells as few as 10 fruits.
This shows how Malawi’s economic challenges have reduced people’s spending power, forcing many households to avoid buying things they consider non-essential, such as watermelons.
The interest rate cut is a sign that the economy may slowly improve, but the benefits will take time to reach ordinary people.
For now, many Malawians like Chikopa are still waiting for the day when customers return and business picks up again.
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