Malawi's economic recovery is currently fragile due to delays in implementing macroeconomic reforms and external shocks, according to the latest World Bank Malawi Economic Monitor (MEM). The report highlights that ongoing economic instability prevents the country from realizing its potential for higher growth and sustainable development.
The MEM, a semi-annual analysis of Malawi's economic and structural issues, indicates that despite bold reform measures in 2023 supported by an IMF Extended Credit Facility (ECF) and budget support from development partners, progress has stalled. This edition, titled "The Rising Cost of Inaction," points out that structural imbalances have been worsened by overspending and debt accumulation. These factors contribute to increased macroeconomic instability and limit opportunities for productive investment.
Without proactive policy reforms, challenges such as rising domestic debt levels, external debt vulnerabilities, exchange rate instability, low foreign exchange reserves, and high inflation are likely to persist. According to the MEM, these issues will continue to crowd out private sector investment unless urgent reforms are implemented.
"Macroeconomic stability is a foundational pre-condition for Malawi’s economic recovery and longer-term prosperity," says Firas Raad, World Bank Country Manager for Malawi. He emphasizes the importance of stabilizing public finances and achieving debt sustainability as essential steps towards attracting private investment.
The MEM also focuses on Malawi's mining sector as a potential driver of broad-based economic growth. With abundant energy transition minerals like graphite and titanium available in the country, there is significant potential for export revenues over the coming decades. However, this opportunity requires strengthening legal frameworks and institutional capacity within the mining sector.
"Between 2026 and 2040, the mining sector could generate a total of $30 billion in exports," states Robert Schlotterer from the World Bank’s Energy and Extractives Global Practice. He stresses that key reforms are necessary to implement a "grow, protect, and benefit" approach in order to achieve these goals.
To support this effort nationally, the MEM recommends adopting informed policies for sustained growth in mining; boosting government institutional capacity; ensuring effective social protection; and managing mining revenues transparently for Malawians' benefit.