* I remain committed to ensuring that we together pave and direct the right path for the economic trajectory of Malawi, and our policies must be scrutinised openly
* And also support others to be educated on what is happening around us — to achieve a more sustainable economic development path for the country
Analysis by Chifipa Mhango, DCG Chief Economist
Good day fellow Malawians, today, the 15th of July 2025, I spent my day going through some of the Reserve Bank of Malawi (RBM) published documents randomly. I have always believed that information is key, and it’s important that one is well informed through reading — especially in the field of Economics.
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The direction of the country lies in how the economy is being managed, and the Central Bank of any country is key to this responsibility.
To start on the positive note, the RBM is now in the profit mode, for both comprehensively as a Group and solely as a Bank, with reported profits of MK409.6 billion and MK403.9 billion,respectively for the year ending 31st December 2025, as reported in the Annual Report released on 23rd May 2025.
Across the board, be it before and after foreign exchange revaluations, the RBM is reporting profits, which is excellent news. Well done to the RBM leadership and entire staff for this positive development, which represents a turnaround in operations.
However, areas to continue monitoring are rising personnel expenses from a consolidated MK58.4 billion in 2023 to MK76.7 billion in 2024 financial years.
Going further into the RBM Annual Report of RBM, on the Financial Statement that I am a bit uncomfortable is the Baobab Securities Limited – Frontera deal.
As directly reported by the RBM, on page 66 of the Annual Report released on 23rd May 2025 as below:
The Group, which I believe refers to RBM, entered into a borrowing arrangement with Frontera Capital Group Limited (FCGL) who acted as an arranger and calculated agent of local currency fixed income transactions.
The borrowing was facilitated on behalf of Baobab Securities Limited, with the Bank conducting a kwacha-to-USD swap amounting to K36 127 million against US$45 million.
However, the local currency payments to Frontera are currently held by the Bank and are scheduled for payment five years from the date the deal was structured.
In this context, the kwacha leg transaction has been recognised as a loan for a duration of five years, carrying an annual interest rate of 24%, with interest payments made on a quarterly basis.
Fellow Malawians, the above is a statement directly sourced from the Annual Report of the RBM, released on 23rd May 2025. I draw the attention of the nation and those responsible for representing Malawians in various capacities to the words: “An arranger and calculated agent”.
We are all at liberty to google these two entities Frontera Capital Group Limited (FCGL), and the key transactor Baobab Securities Limited.
From the details reported, this seems to be a forex transaction deal which RBM used an “agent”. I am not sure if a reputable Central Bank would conduct its operations through an “agent” which comes across as a “boutique firm” — I stand to be corrected here.
I also want to draw the attention of the nation to what seemed to be a “forex transaction deal” is turned into a loan for a duration of five years repayment period, with no mention of the actual transaction dates. I am not sure if such conduct is normal for a reputable Central Bank — I also stand to be corrected.
However, I can put it that there is no mention of the motivation or reasons for this transaction. My overall economic concern as a citizen is; “Is it unsustainable for an economy to rely on getting such debt to boosts its foreign reserves, considering the repayment interest rate of 24%?”
I believe more details should be provided for the nation to understand this deal than the high-level reporting from RBM, including “agent” fees and how this “agent” was recruited.
The RBM Annual Report released on 23rd May 2023, has also this concerning picture of how we are managing our economy, as per below on page 64:
In June 2020, the Group restructured US$350 million swap facilities with AfreximBank into a note purchase facility and obtained an additional US$100 million as part of Covid-19 pandemic response.
In September 2021, the Group obtained an additional facility of US$210 million under the floating rate amortization notes on which the Group had made drawdowns fully the facility as at 31 December 2024 to repay part of the US$100 million and US$350 million facility.
EDF negotiated Afrexim note facility in 2019 aimed at supporting the financing of various trade and trade enabling initiatives being undertaken by eligible customers.
The Bank issued unconditional counter IFRS 9 financial guarantees. As at 31 December, 2024, a total sum K616 564 million were in arrears, and negotiations for debt restructuring with the AfreximBank are ongoing.
My fellow Malawians, the above does not reflect a country that has been independent for 61 years at all. It’s rather a country that is dependent for years.
Now I understand why Malawi is a darling of AfreximBank. As a country, we are stuck with AfreximBank if we don’t correct our behaviours of reckless spending and excessive borrowing.
No country can survive external shocks if its wallet is outsourced to international banks, with unbearable interest rates repayment on loans. The country is being run on loan facilities.
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Another concerning matter, which is unsustainable for the Malawi economy is again another facility as reported on page 64 of the RBM Annual Report released on 23rd May 2025, as below:
The Reserve Bank of Malawi entered into a committed facility with Trade and Development Bank where TDB makes available to the Bank a revolving multi-tranche special commodity and trade financing facility in form of a dollar denominated uncommitted drawdown in an aggregate amount equal to US$307 million.
The facility comprises the following Tranches: Tranche A: Revolving structured petroleum facility (NOCMA); Tranche B: Structured special commodities import facilities; Tranche C: Export facility (EDF); Tranche E: Malawi Government. If certain agreed conditions are met the Bank requests from TDB a draw down for an irrevocable letter of credit in the case of fuel importation by NOCMA or commodity financing for EDF.
The beneficiaries are expected to deposit local currency with the Bank sufficient to cover the next repayment. Although legally the borrower is the Group these loans are serviced by the beneficiary of the Tranches.
The Bank is substantially a financial guarantor as its obligation is to guarantee the availability of foreign reserves and to make good of any defaulted amounts by the beneficiaries.
Fellow Malawians, as reported by the RBM, the US$307 million facility is a revolving short-term fund and attract interest with varying rates ranging from 3%-13%.
As at 31 December, 2024, the revolving loan facility was in arrears, and negotiations for debt restructuring with TDB are anticipated as ongoing. As the facility agreement if the borrower fails to pay any amount payable on its due date, interest shall on the overdue amount from the due date up to the date of actual payment at a rate of 2% per annum over and above the normal rate of interest.
The above paints a dire picture of the state of the Malawi economy from the way we are dealing with issues. In summary, we are just killing sporadic fires without necessary coming up with long term sustainable solutions.
It is loans after loans, with arears accumulating, and more interest being charged. Even short-term solutions are not working for the country — hence fuel shortages in Malawi will persist. Forex cannot be generated through loans, its unsustainable.
The fiscal side and Trade & Industry policy have totally collapsed, and the country needs urgent holistic solutions. Opening one industry company in five years will not take the country forward.
Reserve Bank of Malawi
My last element of concern stems from the RBM Economic Report, which takes me to the area of fiscal side of Malawi Government operations termed “Other Expenditures”. This term is always concerning, for it never provides details of what these “Others” are.
To break it down for the nation to know, is that, as sourced from the RBM report, Malawi Government spent a total of MK264.4 billion on “Other Expenditure” between May 2024 to May 2025. This “Other” is very concerning in that the amount is not consistent, and fluctuates as it pleases the spenders, that is even reached MK39.7 billion in July 2024 alone, with the lowest in this period being MK2.3 billion in February 2025. In the first 5 months of 2025 to May, a total of MK61.3 billion has been spent on these “Others”.
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My fellow Malawians, it is important the nation is drawn to these elements. It is important that we scrutinise and get clarity to understanding “Other Expenditure”, for clear accounting and reporting of “Other Expenditure” is crucial for government transparency and accountability.
It is also important for budgeting purposes that the Malawi nation understand the nature and purpose of “Other Expenditure“, for it is essential for effective budgeting and resource allocation.
Above all, analysing “Other Expenditure” can reveal important insights into government priorities and policy impacts. In essence, “Other Expenditure” is necessary but sometimes complex category that requires careful attention to ensure accurate financial reporting and effective government operations — MK264.4 billion cannot just disappear in 12 months as “Other”, it must be accounted for.
On another positive note, at least the RBM is reporting — however, in a country where there are data cost challenges, not everyone can afford to download these huge reports loaded on websites or the levels of education to know where such reports as above are available.
It remains puzzling as to why our business media colleagues could not even share or cover the excellent news of the RBM being in a profit mode.
Nonetheless, I remain committed to ensuring that we together pave and direct the right path for the economic trajectory of Malawi, and our policies must be scrutinised openly, and also support others to be educated on what is happening around us — to achieve a more sustainable economic development path for the country.
Chifipa Mhango
NOTE: Chifipa ‘Chifi’ Mhango is Director of Economic Research and Strategy for South Africa’s Don Consultancy Group and this article has been copied to
* Minister of Finance and Economic Affairs
* Minister of Trade and Industry
* Reserve Bank Governor and Deputy Governor
* Political Parties eadership in Malawi and Malawi media houses
