Country Overview

The Southern African nation of Malawi is bordered by Mozambique to the south and west, Zambia to the east, and Tanzania to the north. It has an estimated population of 16.8 million as of 2014. With the support of the International Monetary Fund (IMF) and the World Bank, Malawi has been able to make important economic and structural reforms and sustain its economic growth rates over the last decade. Nevertheless, poverty is still widespread and the economy remains undiversified and vulnerable to external shocks.

Political Context

Malawi continues to enjoy a stable and democratic government. Since the end of the one party regime in 1993, it has organized five peaceful presidential and parliamentary elections, one of which was a tripartite including local government elections. Current president Prof. Arthur Peter Mutharika is in his first five-year term which started in 2014. The next elections are due in 2019.

Economic Overview

Real gross domestic product (GDP) grew by 5.7% in 2014 but slowed down to 2.8% in 2015 as Malawi suffered from dual challenges of adverse weather conditions and macroeconomic instability. Flooding in southern districts followed by countrywide drought conditions saw a contraction in agricultural production. Maize, the key crop for food security purposes, saw a 30.2% year-on-year drop in production. As a result, an estimated 2.8 million people (17%of the population) are unable to meet their 2015/16 food requirements.

Weak fiscal discipline has been a core driver of macroeconomic instability during recent years. In the wake of a public financial management scandal in 2013, that triggered sharp reductions in the level of on-budget development assistance received by Malawi, Government has run persistently large fiscal deficits standing at 5.4% in FY14/15. Similarly expenditure has been under pressure due to rising debt service costs, increasing public sector wage demands, costly subsidy schemes and the settlement of outstanding arrears. Although authorities have borrowed heavily from domestic sources in order to finance fiscal deficits, data for the second half of 2015 shows that domestic borrowing requirements have fallen within end-year levels.

Social Context

Poverty and inequality remain stubbornly high in Malawi. The 2010/11 Integrated Household Survey showed that over half of the population was poor and one quarter lived in extreme poverty. These numbers are not expected to change much with the new estimates to be available in 2017. Poverty has been increasing in rural areas where 85% of the population lives, compared to urban areas where it fell significantly from 25 to 17%. A key obstacle to reducing poverty is low agricultural productivity. The majority of the poor remain locked in low productivity subsistence farming.  

Development Challenges

Malawi’s main challenges include improving infrastructure  mainly energy and water delivery which are adversely affecting private sector investment, addressing a scarcity of skilled human resources,  provision of health care, reforming its public financial management (PFM) system, and the large and relatively inefficient public service  including parastatals .

Malawi’s reform of its PFM is critical to restore public and donor confidence. Advances have been made in fixing security gaps that were identified during “cashgate.” The Electronic Fund Transfer (EFT) has been successfully used for payment of salaries of all civil servants and the risk assessment for using the EFT has been done. There is also an improvement in the submission of consolidated financial statements to the Auditor General for auditing.

Last Updated: Apr 12, 2016

World Bank Group Engagement in Malawi

The World Bank Group’s Country Assistance Strategy (CAS 2013-2016) for Malawi has been extended to FY17. It is organized around three main pillars: the first focuses on promoting sustainable, diversified and inclusive growth; the second pillar addresses enhancing human capital and reducing vulnerabilities, while the third one is on mainstreaming governance for enhanced development effectiveness. The current portfolio comprises of 10 projects for a total commitment of about $594 million. The key sectors addressed include: agriculture, education, energy, mining, water, finance, private sector development, social protection, natural resources management, nutrition and HIV/AIDS.

International Finance Corporation (IFC)

The International Finance Corporation’s current strategy for Malawi focuses on:

  • Business Environment reforms
  • Improving SME access to finance
  • Development of new innovations such as Warehouse Receipt and Commodity Exchange systems, Collateral Registry and other systems for agri-business development
  • Supporting the Mobile Banking Initiative, and
  • Public-Private Partnerships

Last Updated: Apr 12, 2016

The World Bank Group (WBG) has contributed to Malawi’s development performance in the following areas:

Improving Public Sector Performance

The depth of the challenges associated with Malawi’s public sector governance, particularly those related to public financial management, has proven far greater than originally anticipated. The Financial Reporting and Oversight Improvement (FROIP) MDTF was the main vehicle for responding to “cash gate”. The focus of these efforts has been on reducing individual discretion and plugging security gaps, increasing mandatory reporting, and ensuring transparency. The WBG has supported the government in fixing problems in the Integrated Financial Management Information System (IFMIS), and was a key partner to government in creating the PFM Emergency Plan that was subsequently monitored in weekly meetings of development partners and cabinet officials.

Increased Productivity and Commercialization of Agriculture

Under the Irrigation, Rural Livelihoods and Agricultural Development Project, some 45,000 farmers now benefit from 10,000 ha of rehabilitated/new irrigation works and from recent increases in maize and rice yields. More than 650,000 people have participated in an inputs for assets initiative under this program. In the agribusiness sector, IFC is helping Malawi commercialize and diversify its export base away from tobacco: recent International Finance Corporation (IFC) investments include Malawi Mangoes, a brownfield investment in mango and banana processing, improving access to capital for farmers through advisory services (Warehouse Receipt System Project), and establishment of a collateral registry that enables farmers to use movable property as collateral.

Economic Infrastructure and Diversification

Energy, transport, and water are key to Malawi’s development. In energy, over 100 distribution transformers have been installed each year under the Energy Sector Support Project. Recent bilateral agreements with neighboring countries are laying the foundations for strengthened cross-border trade, the benefits of which could be significant with the construction of regional infrastructure such as the new rail line between Tete and Nacala Port initiated under a public-private partnership. The water problems especially in major cities are being addressed with the WBG supporting rehabilitation and installation of distribution systems under the National Water Development Project. A geophysical survey done in 2014 under the Mining Technical Assistance Project has provided Malawi with high resolution data critical to help the country diversify from agriculture to mining.

Improving Access and Delivery of Public Services

Although Malawi continues to face challenges in the education sector, the IDA/GPE-financed Project to Improve Education Quality has led to better Standard 5 graduation rates, the construction of 2,380 classrooms and the provision of grants to 5,359 schools to improve access and quality. The Multisectoral HIV/AIDs and Nutrition Project has contributed to national HIV response targets which helped Malawi meet the HIV 2015 Millennium Development Goal target, and increase nutrition access. The National Water Development Program has provided clean water to more than 1.3 million people.

Lowering Vulnerability and Enhancing Resilience.

Good progress has been made in addressing economic vulnerability and building resilience. Under the Malawi Third Social Action Fund (MASAF III), public works targets were exceeded–the program reached 1.6 million beneficiaries (50% of whom were female), creating 19 million person-days of work and improving family security, savings and the ability to pay for school fees, medicines and agricultural inputs. This program also provides the poor--particularly female headed households with an important hedge against disaster risk. The fourth generation MASAF-IV is among other things helping the government establish a national safety net.

Improving natural resource management, climate and disaster resilience

Protected area management has been enhanced in four national parks and reserves, and an Integrated Flood Risk Management Action Plan was adopted in 2012. In the immediate aftermath of the January 2015 floods, the WBG rapidly mobilized $600,000 for emergency access and an Emergency Floods Recovery operation of $80 million is helping with recovery and reconstruction while complementing existing International Development Association (IDA) support for longer-term resilience building.

Last Updated: Apr 12, 2016

The European Union, African Development Bank, United Nations agencies, bilateral donors such as DFID, USAID, Germany, Norway, and China, World Bank Group, and IMF are among Malawi’s key partners. In 2014, the Malawi Government and its cooperating partners endorsed a Development Cooperation Strategy (DCS) to guide development cooperation in the country from 2014 to 2018. The strategy is in line with principles encapsulated in the Paris declaration on Aid Effectiveness, the Accra Agenda for Action, and the Busan Global Partnership for effective Development Cooperation. The DCS advocates for inclusive partnerships, government leadership and country ownership of the national development agenda, and alignment around national systems and strategies. It also embraces a focus on results that matter to the poor. The DCS encourages partnerships among development actors based on mutual trust; and transparency and accountability to one another.

Last Updated: Apr 12, 2016


Malawi: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments