Malawi is facing a challenging economic situation, with persistent fiscal imbalances, high inflation, and growing debt limiting both development and social progress. According to the World Bank Group’s latest Public Finance Review (PFR), titled "Restoring Stability, Rebuilding Trust," these challenges have resulted in one of the highest fiscal deficits in the region—averaging 11.9 percent of GDP from 2022 to 2024—and a public debt burden approaching levels last seen before 2006.
The report notes that much of Malawi's domestic revenue is consumed by wages, debt service, pensions, gratuities, and statutory transfers. This budget rigidity leaves little room for priority development spending. Additionally, delays in implementing key financial management systems such as the Integrated Financial Management Information System (IFMIS) and e-Government Procurement (e-GP) are affecting expenditure efficiency. Weaknesses in project appraisal and selection have also led to investments that do not deliver expected results.
Social sectors including education, health, and social protection remain underfunded and increasingly dependent on declining external aid. The country’s vulnerability to climate events further strains its resources.
The PFR highlights the mining sector’s potential contribution to public finances. It estimates that seven projects focused on energy transition minerals could bring in between $200 million and $500 million annually by the early 2030s. However, actual revenues will depend on how these projects are operated and the terms negotiated with investors.
“This review lays out a practical roadmap to stabilize public finances fairly, while accelerating inclusive growth. With sustained government leadership and broad stakeholder support, Malawi can turn a difficult moment into a springboard for reform—protecting essential services, strengthening institutions, and crowding in private investment,” said Firas Raad, World Bank Group Country Manager for Malawi.
The report recommends pursuing balanced fiscal consolidation measures that protect crucial social and infrastructure spending while seeking greater efficiency across government operations. On revenue collection, it suggests rationalizing tax incentives, eliminating unnecessary VAT exemptions, and advancing digitalization efforts to improve compliance. The completion of IFMIS optimization and enhanced Parliamentary oversight are identified as important steps toward increasing transparency and expenditure control. Over time, stronger debt management practices will be needed to reduce vulnerabilities and create more fiscal space.
Contact information for further inquiries was provided for representatives based in Harare and Washington.