Washington, DC – The Executive Board of the International Monetary Fund (IMF) has completed its Article IV consultation with Malawi. The country continues to face significant macroeconomic challenges, including external shocks, low growth, persistent inflation, unsustainable fiscal and debt dynamics, and declining Official Development Assistance.
Economic activity in 2024 was affected by lower-than-expected agricultural output and foreign exchange shortages, leading to a decline in real GDP growth to 1.8 percent from 1.9 percent in 2023. Inflation remains high, and the overall fiscal deficit stood at 10.1 percent of GDP in FY2024/25 due to lower revenues and election-related spending.
The official exchange rate against the US dollar has been fixed since April last year. Inflation peaked at 30.7 percent year-over-year in February 2024 before easing to 27.7 percent in May 2025 during the harvest season. Public debt reached 88 percent of GDP by the end of 2024.
Growth is projected to increase moderately from 2.4 percent in 2025 to 3.4 percent by 2029, while inflation is expected to stabilize around 15 percent over the medium term. Risks include loose macroeconomic policies, reduced donor support, trade tensions, social unrest surrounding elections, and lower food production.
Executive Directors emphasized that Malawi is at a critical juncture facing high inflation and an unsustainable fiscal outlook. They stressed the need for urgent policy action to stabilize the economy and implement reforms for sustained growth.
Directors highlighted fiscal consolidation focused on domestic revenue generation as essential for reducing inflationary pressures and improving debt sustainability. They urged tax policy reforms and expenditure control while encouraging investment in infrastructure and human capital.
Restoring public debt sustainability through external debt restructuring and addressing domestic borrowing costs are critical steps recommended by Directors.
Monetary policy tightening was advised to re-anchor inflation expectations alongside fiscal adjustments to eliminate deficit monetization.
A unified market-clearing exchange rate was deemed integral for achieving macroeconomic stability and accelerating economic growth.
Governance reforms were underscored as necessary for improving investment climate and promoting economic diversification.
The next Article IV consultation with Malawi is expected on a standard annual cycle.