Creditors ‘shift’ focus as government borrowing slumps

Africa-Press – Zambia. Cred­it­ors, includ­ing com­mer­cial banks, and investors are explor­ing altern­at­ive aven­ues to push funds as the gov­ern­ment con­tin­ues nar­row­ing the level of its domestic bor­row­ing. The gov­ern­ment— which was once touted as the main con­sumer of domestic credit—has, in recent months, scaled down its bor­row­ing using instru­ments such as Treas­ury bills (TBs).

For instance, fig­ures show that, in Janu­ary, Treas­ury bills secur­it­ies auc­tion applic­a­tions reached K466.02 bil­lion, of which the gov­ern­ment only bor­rowed K25.36 bil­lion. This is com­pared to K150.88 bil­lion the gov­ern­ment bor­rowed in Decem­ber 2025 from offers worth K180.89 bil­lion. At the Feb­ru­ary 10, 2026 Treas­ury bills auc­tion, the Reserve Bank of Malawi (RBM) raised funds exclus­ively through the 91-day instru­ment, with the aver­age yield drop­ping to 12 per­cent from 15 per­cent in the pre­vi­ous sale.

The cent­ral bank accep­ted only K12.4 bil­lion out of K179 bil­lion offered by investors, sig­nalling tighter con­trol of interest costs and reduced reli­ance on short-term debt. Mean­while, no alloc­a­tion was made on the 182-day and 364-day bills.

The latest out­come fol­lows a series of Janu­ary auc­tions in which RBM either rejec­ted all bids or remained highly select­ive. RBM also rejec­ted bids worth K145.58 bil­lion applied by investors for all three secur­it­ies at a Treas­ury bills auc­tion held dur­ing the week end­ing Feb­ru­ary 6, 2026

In a response to a ques­tion­naire, Bankers Asso­ci­ation of Malawi (Bam) Pres­id­ent Philip Madinga said excess liquid­ity in the bank­ing sec­tor was prompt­ing fin­an­cial insti­tu­tions to explore altern­at­ive uses of funds.

“These include expand­ing credit to pro­duct­ive sec­tors of the eco­nomy, sup­port­ing private sec­tor growth ini­ti­at­ives and strength­en­ing part­ner­ships in infra­struc­ture and trade fin­ance,” Madinga said. He said while this may tem­por­ar­ily limit the uptake of funds by the gov­ern­ment, it also sig­nalled a com­mit­ment to prudent fiscal and mon­et­ary man­age­ment. Madinga said banks con­tin­ued par­ti­cip­at­ing act­ively in gov­ern­ment secur­it­ies auc­tions and respec­ted RBM’s role in man­aging mon­et­ary policy and pub­lic debt.

In a Face­book page post, investor Bene­dicto Nkhoma said, due to the trend, investors must rethink their strategies. “Short-term interest rates are likely to con­tinue soften­ing, banks will earn less from Treas­ury bills and deposit rates may slowly come down,” Nkhoma said. Fin­an­cial Deal­ers Asso­ci­ation of Malawi (Fimda) Pres­id­ent Leslie Fatch described the devel­op­ment as part of the gov­ern­ment’s broader object­ive to gradu­ally bring down interest rates, with a long-term tar­get of redu­cing the policy rate to 12 per­cent by 2028.

He said while some investors had adjus­ted by lower­ing their bid rates, a sig­ni­fic­ant por­tion of the mar­ket con­tin­ued to hold out for higher returns, res­ult­ing in repeated rejec­tions. Eco­nom­ics Asso­ci­ation of Malawi Pres­id­ent Ber­tha Bangara Chi­kadza said the rejec­tion of longer­d­ated bills could sig­nal early steps toward restruc­tur­ing domestic debt, par­tic­u­larly in terms of matur­ity and bor­row­ing costs.

“Avoid­ing longer matur­it­ies such as the 182-day and 364day Treas­ury bills could be a start­ing point toward domestic debt restruc­tur­ing,” Chi­kadza said. She said, given the cur­rent liquid­ity levels and lim­ited fin­an­cial instru­ments, the Malawi Stock Exchange remained an obvi­ous altern­at­ive for investors who are seek­ing returns. In an earlier inter­view, Treas­ury spokes­per­son Wil­li­ams Banda said the decision to limit bor­row­ing was driven by reduced fund­ing require­ments and efforts to cut interest pay­ments.

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