Malawi

Located in Southern Africa, Malawi is landlocked, sharing its borders with Mozambique, Zambia, and Tanzania. The country's estimated population is 21.1million (2023) with an annual growth rate of 2.6%.

Malawi remains one of the poorest countries in the world despite making significant economic and structural reforms to sustain economic growth. The economy is heavily dependent on agriculture, which employs over 80% of the population, and it is vulnerable to external shocks, particularly climatic shocks.

In January 2021, the government launched the Malawi 2063 Vision that aims to transform Malawi into a wealthy, self-reliant, industrialized upper-middle-income country, through a focus on agriculture commercialization, industrialization, and urbanization. The first 10-year implementation plan anchors the World Bank’s Country Partnership Framework FY21- FY26.

Political Context

Malawi has enjoyed sustained peace and stable governments since independence in 1964. One-party rule ended in 1993. Since then, multi-party presidential and parliamentary elections have been held every five years.

Malawi’s seventh tripartite elections were conducted in September 2025. Peter Mutharika of the Democratic Progressive Party (DPP) won the election with 56.8% of the votes against the incumbent Lazarus Chakwera of the Malawi Congress Party (MCP) who got 33%. The DPP won the election after being in opposition for only five years following their loss in the June 2020 presidential election. In 2014, Peter Mutharika won the election against President Joyce Banda, and this is the second time for him to be Malawi’s President, after a break of five years.

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Malawi’s economy is struggling amidst large macroeconomic imbalances, frequent external shocks, and rising population pressures. Real gross domestic product (GDP) is estimated to have grown by only 1.9% in 2025, a marginal improvement from 1.7% in 2024—but with the population expanding by around 2.6% annually, GDP per capita fell for the fourth consecutive year. Growth is projected to reach 2.7% by 2027, yet even this trajectory is unlikely to meaningfully improve living standards for most Malawians. Structural constraints and foreign exchange distortions continue to limit industrial activity and job creation.

The fiscal deficit narrowed to 8.4% of GDP in 2025 from 9.1% in 2024, with primary surpluses recorded in the final quarter after significant pre-election overruns. Still, persistently large fiscal deficits have driven up public debt, crowded out critical social and development spending, and reduced the availability of credit to the private sector.

Inflation remains among the region’s highest, averaging 28.4% in 2025. Driven by high food prices and money creation linked to pre-election deficits, persistent inflation is eroding household welfare. Nearly half the population cannot afford a basic consumption basket, and poverty is projected to remain at 76.6% in 2026. Though inflation is trending downward, the damage to purchasing power and public confidence is significant.

Malawi’s external imbalances are acute. Imports are more than triple exports, reflecting a weak and undiversified export base coupled with high trade costs and rising import demands. Official reserves remain critically low at under one month of import cover, with total economy-wide reserves slightly above two months. This combination of a widening trade deficit and depleted reserves leaves Malawi highly vulnerable to external shocks, with limited buffers to absorb them.

Since October 2025, the government is initiating long-overdue reforms to restore spending discipline, increase revenues, reprofile domestic debt, and strengthen policy frameworks. Progress is being made, but high recurrent expenditures, heavy borrowing, and a weak investment climate remain largely unresolved.

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Malawi faces deep structural challenges that have long held back growth and poverty reduction.

Chronic food insecurity persists, driven by weather shocks, low agricultural productivity, and inefficient fertilizer distribution. Policies have long emphasized food self-sufficiency over commercialization, slowing the transition to higher-productivity sectors and keeping exports weak. Around 76% of the population lives below $3 per day.

Although fertility has declined, with 41% of the population below the age of 14, demographic pressures on the labor market are intensifying. The labor market is 91% informal, unemployment stands at 19%, and 55% of workers face labor underutilization—a significant drag on productivity and inclusive growth.

Firms operate in a difficult environment, characterized by high costs, unreliable power supply, and pervasive foreign exchange distortions. The result is low productivity and underutilized capacity across sectors.

Malawi has been in debt distress since 2022, and external debt restructuring remains incomplete while domestic debt reprofiling has recently started. Significant debt service demands constrain the fiscal space.

Inconsistent reform commitment has also undermined stabilization and investor confidence. An adjustment program launched in 2022–23 to restore fiscal discipline, strengthen debt management, and increase exchange-rate flexibility, weakened in 2024 as elections neared. Exchange-rate reforms were reversed, the parallel-market premium widened to over 140%, and stabilization efforts were delayed.

Entrenched governance weaknesses and inconsistent reform commitment have slowed debt reduction and deterred the private investment needed to diversify exports and spur growth. Sustained, credible policy implementation is now essential—not only to stabilize the macroeconomy, but to unlock productivity growth, attract foreign direct investment, and enable the private sector to become genuine engines of development and job creation.

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The World Bank Group Malawi Country Partnership Framework (CPF) FY21-25 focuses on bolstering foundations for growth and accountability, promoting private sector-led jobs, and strengthening human capital development, with a focus on digital development and women’s empowerment. The FY25 Performance and Learning Review extended the CPF to FY26 and recast the third focus area to strengthen climate resilience and crisis response. A new CPF is expected in FY27.

As of March 2026, the World Bank’s Malawi portfolio consists of 25 IDA lending operations with a total commitment amount of $3.36 billion, of which five projects ($618.60 million) are regional. These are complemented by $259 million in trust funds.

The portfolio includes financing for programs in agriculture and food, urban resilience and land, social protection and jobs, governance, basic service delivery (including health, education, and water and sanitation), and support in the energy, transportation, digital development, trade logistics, and finance sectors.

IFC investments in Malawi over the past five years total $79 million. The portfolio focuses on agribusiness, infrastructure, and the financial sector, supporting firm resilience, foreign currency generation, and jobs.

IFC also has a $7 million advisory program, supporting private-public dialogue, agriculture, energy, and financial sectors. With the government, IFC delivers transactional advisory services to develop bankable projects in water and energy infrastructure.

IFC partners with commercial agribusinesses that integrate smallholder farmers into their value chains, enhance climate resilience, boost productivity, support export diversification and create new jobs. It provides trade finance solutions to financial institutions to facilitate imports and stimulate business activity. Advisory support is strengthening credit reference systems and collateral registries, making it easier for SMEs and underserved communities to access financing they need to grow.

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The European Union, African Development Bank, United Nations agencies, bilateral donors such as Norway, Ireland, FCDO, the US Government, Germany, Japan, China, Iceland, the Government of Flanders and the World Bank Group and the International Monetary Fund are among Malawi’s key development partners.

The World Bank Group is collaborating with a range of development partners to promote important economic, social and policy reform agendas in Malawi. The EU, Norway, Ireland, and the Government of Flanders are financing a Multi-Donor Trust Fund (MDTF) in support of an IDA-financed Food System Resilience Program (FSRP) – a six-year engagement aiming to boost agri-business, productivity, and commercialization. A similar MDTF, financed by UK-FCDO, Iceland, Norway, European Union and USAID is backing the Social Support for Resilient Livelihoods Project (SSRLP). This large IDA-funded social protection engagement seeks to improve resilience among poor and vulnerable communities and to strengthen the country’s national platform for managing social safety nets.

In the energy sector, the World Bank Group is collaborating with a range of development financing institutions (DFIs) to ensure the operationalization of the large Mpatamanga Hydropower Storage Project (MHSP). The MHSP is structured as a private-public partnership (PPP) and aims to transform Malawi’s energy landscape and accelerate economic growth.  Once completed, MHSP will more than double the country’s installed capacity of electricity generation.  The DFIs include the European Investment Bank (EIB), the African Development Bank (AfDB), and Proparco, among others.

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The  Social Support for Resilient Livelihoods Project  ($490 million) improved resilience of poor and vulnerable populations and strengthened safety nets, supporting 3.06 million extremely poor through the Social Cash Transfer, Climate-Smart Enhanced Public Works, and Livelihoods Support programs. Results include:

• 2.06 million people gained short-term employment through climate-aligned public works while restoring 1.1 million hectares of degraded land, improving soil fertility and water retention.
• 1 million people received unconditional cash transfers to meet basic needs, improve nutrition, health, and education, and invest in productive assets and agriculture.
• 525,000 households were supported to establish micro and small enterprises/ cooperatives in agricultural value chains, confectionary, and trading.

The Malawi Energy Access Project (MEAP) ($100 million) was designed to fast-track electrification and provide electricity access to 1.6 million people (8% of the population). Results include:

• 2 million people now have access to electricity (both on-grid/off-grid), contributing towards the National Energy Compact of 2025-2030.
• Electricity Supply Corporation of Malawi, ESCOM, an implementing agency, has embraced transparency and accountability by publishing all quarterly connection targets on its customer platforms.
• 1.13 million people have access to off-grid solar provided by the private sector under the Ngwee Ngwee Ngwee Fund, established by the Ministry of Energy and Mining.

The  Financial Inclusion and Entrepreneurship Scaling Project  ($86 million) enhanced financial access and entrepreneurship among micro, small, and medium enterprises (MSMEs). Results include:

• 50,000 MSMEs (33,000 women-owned, 9,000 youth-owned) were supported and are doing business in retail trade, agriculture, construction and light manufacturing sectors.
• 165 new medium-sized enterprises were established.
• 36,000 direct jobs were created through the MSMEs financing opportunity.

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