Malawi is experiencing a severe economic crisis, characterized by high inflation, declining living standards, and significant food insecurity. According to the 21st Edition of the Malawi Economic Monitor (MEM), titled “Navigating Uncertainty,” economic growth has fallen from an average of 4.1% between 2011 and 2019 to 2.2% since 2020. This growth rate is lower than the population growth rate of 2.6%, leading to reduced incomes for many Malawians.
In 2024, economic output growth further decreased to 1.8%, affected by an El-Niño-induced drought and ongoing foreign exchange shortages. Inflation remains high due to elevated food prices, exchange rate fluctuations, and monetary expansion driven by fiscal deficits.
The MEM notes that Malawi's economy remains vulnerable, with GDP growth for 2025 downgraded to 2.0% from a previously projected 4.2%. Factors contributing to this downgrade include a weaker-than-expected agricultural season, suspension of some bilateral foreign aid, and challenges faced by the private sector in importing essential inputs. The premature end of the IMF program is also expected to negatively impact external financing.
Food insecurity continues to affect many Malawians due to climatic shocks, insufficient investment in climate-resilient agriculture, and limited foreign exchange hampering food imports. Since the 2022/23 farming season, staple grain production has not met domestic needs. Maize production is estimated at around 2.9 million metric tons this season but falls short of the national requirement of at least 3.3 million metric tons.
Fiscal imbalances are worsening because of expenditure overruns and revenue shortfalls, increasing borrowing needs and deepening current account imbalances. In FY2024/25, overspending led to deviations from the approved budget. The budget for FY2025/26 is expected to maintain high spending levels due to election year pressures.
In light of these challenges, urgent reforms are necessary across three areas:
Restoring macroeconomic stability involves increasing domestic revenues through tax system reforms and improving tax administration efficiency while reducing wasteful spending.
Creating conditions for increased private sector investment requires phasing out fuel subsidies and implementing mining sector reforms.
Building resilience involves investing in climate-resilient agriculture and enhancing social protection systems.