Malawi’s public debt has risen to unsustainable levels exceeding 90 percent of gross domestic product, posing significant risks to economic stability, Finance Minister Joseph Mwanamvekha said during the presentation of the country’s annual budget.
The southern African nation is seeking renewed financial support from the International Monetary Fund (IMF) as authorities attempt to restore fiscal balance following years of economic strain marked by high inflation, currency pressures and persistent fiscal deficits.
Mwanamvekha told lawmakers the government hoped to secure a new IMF support programme “in the short to medium term” to help stabilise public finances and rebuild investor confidence in the donor-dependent economy.
Malawi has faced prolonged economic difficulties, with inflation remaining above 20 percent annually since mid-2022, eroding household purchasing power and increasing the cost of essential goods including food and fuel.
The finance minister said total public debt stood at 23.9 trillion kwacha, equivalent to about US$13.92 billion, as of December last year. Domestic borrowing accounted for roughly 65 percent of the total debt stock, reflecting increased reliance on local financing amid limited access to external credit markets.
Economists warn that rising domestic debt levels have placed pressure on interest rates and constrained private-sector lending, complicating efforts to stimulate economic activity.
Malawi’s fiscal deficit for the current financial year is projected to reach 11.9 percent of GDP, highlighting continued imbalance between government revenues and expenditure. Authorities aim to reduce the deficit to around 9 percent of GDP in the next fiscal year through spending controls and improved revenue mobilisation.
The government is pursuing both domestic and external debt restructuring as part of broader efforts to create fiscal space for priority spending, including social programmes and infrastructure investment.
“We remain committed to restoring debt sustainability while protecting vulnerable citizens,” Mwanamvekha said, noting that fiscal consolidation measures would be implemented gradually to avoid deepening economic hardship.
Malawi’s economic challenges have been compounded by repeated climate-related shocks, foreign exchange shortages and rising import costs, factors that have strained public finances and slowed growth.
Despite these headwinds, the government maintained its economic growth forecast of 3.8 percent for 2026, banking on improved agricultural output and support from development partners to drive recovery.
However, analysts caution that achieving sustainable growth will depend on successful debt restructuring negotiations and renewed external financing, particularly from multilateral institutions.
The IMF has previously emphasised the need for fiscal discipline, structural reforms and enhanced transparency in public financial management as conditions for future lending arrangements.
Malawi defaulted on some external debt obligations in recent years, limiting access to international capital markets and increasing dependence on concessional financing from donors and development agencies.
More Read
Rising debt-servicing costs have increasingly crowded out spending on health, education and infrastructure, raising concerns about long-term development prospects in one of the world’s poorest countries.
Economic observers say securing an IMF programme could unlock additional donor funding and help stabilise the currency, easing inflationary pressures that have weighed heavily on households and businesses.
For now, authorities face the difficult task of balancing fiscal consolidation with economic recovery as Malawi seeks to navigate a fragile macroeconomic environment while restoring confidence in public finances.
