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.

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.

Malawi’s economic growth reached 2.5% but remained below the pace needed to raise per capita income meaningfully. The improvement reflected a partial agricultural recovery following the 2024 El Niño drought. Industrial activity continues to be constrained by foreign exchange shortages, fuel supply disruptions, unreliable power supply, and weak access to imported inputs.

The new government embarked on fiscal consolidation following the 2025 elections, which has started to yield results. The deficit narrowed to 8.8% of GDP in FY2025/26 (1.7% lower than previous year), with stronger revenue mobilization, a higher VAT rate, electronic invoicing, and expenditure restraint. Public finances remain under pressure from high interest costs, arrears, and wage-related pressures.

Real GDP growth is projected to rise to 2.8% in 2027 and exceed 3% by 2028, supported by stronger services activity. The pace of growth will remain insufficient to generate welfare gains unless productivity improves, foreign exchange constraints ease, and private investment strengthens.

Fiscal consolidation is expected to continue, supported by revenue measures, expenditure controls, and domestic debt reprofiling. This could lower near-term interest costs and create space for priority spending, but discipline will be needed to place debt on a downward path. Reserves are expected to rebuild slowly. Inflation is expected to ease from 28.4% in 2025 to 23% in 2026 as food prices soften and monetization of the deficit declines. Poverty is expected to marginally decline to 75.9% by 2028 from 76.6% in 2026.

Policy reversals, fiscal slippages, delays in debt restructuring, exchange rate misalignment, and climate shocks, could weaken growth, raise inflation, and worsen food insecurity. Upside potential would come from an IMF-supported program, faster disinflation, domestic debt restructuring, exchange rate unification, and stronger reform implementation to improve the investment climate and resilience.

Malawi’s growth has been held back, often falling below population growth, by persistent macroeconomic imbalances, and an agricultural model favoring food self-sufficiency and broad subsidies over commercialization and productivity.

Every year, 270,000 young people enter the labor market, yet the economy generates only 40,000 formal jobs. Bridging this gap is central to Malawi's development agenda.

Climate and global commodity price shocks, coupled with disruptions to external financing, have repeatedly exposed these vulnerabilities. Fiscal imbalances and debt distress remain a central constraint. Interest payments absorb nearly half of domestic revenue, crowding out social, infrastructure, and resilience spending. Monetization of the deficit amid weak revenue performance has led to broader macroeconomic imbalances.

Private-sector development is constrained by a challenging business environment, including unreliable power supply, high transport and logistics costs, and limited access to long-term credit. Foreign exchange distortions, manifested in a wide gap between official and parallel market rates, is an additional constraint for the private sector, affecting firms’ ability to import inputs, such as fuel, fertilizer, and equipment. These distortions discourage formal exports, promoting informal foreign exchange activity and weakening investment incentives.

Agriculture continues to perform below potential, with limited irrigation, weak technology adoption, and delayed and inefficient inputs leading to low yields, while heavy reliance on rain-fed maize production keeps rural incomes volatile.

Governance weaknesses and inconsistent reform slowed debt reduction and deterred the private investment needed to diversify exports and spur growth. Sustained, credible policy implementation is now essential to stabilize the macroeconomy and unlock productivity growth, attract foreign direct investment, and enable the private sector to become engines of development and job creation.

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 recanted the third focus area to strengthen climate resilience and crisis response. A new CPF is expected early May 2027.

As of September 2026, the World Bank’s Malawi portfolio consists of 23 IDA lending operations ($3.13 billion), of which four projects ($557.43 million) are regional. These are complemented by $234 million in trust funds (both Bank and Recipient Executed).

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.

International Finance Cooperation’s (IFC) investment in Malawi over the past five years totals $643 million, with the current portfolio focused on agribusiness, infrastructure, and the financial sector supporting firm resilience, foreign currency generation, and jobs.

IFC currently has a $7.5 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 and purpose‑built student housing at national universities through public‑private partnerships. It also provides trade finance solutions to the financial institutions to facilitate critical 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.

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, the International Monetary Fund, and the World Bank Group and 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) and the upcoming Malawi Integrated Social Protection for Resilience and Opportunity Project (INSPIRE-O). This large IDA-funded social protection engagement seeks to create more and better paid jobs, improve resilience among poor and vulnerable communities and strengthen the 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.

The Social Support for Resilient Livelihoods Project ($490 million) improved resilience of poor and vulnerable people and strengthened safety nets, supporting 3 million extremely poor through the Social Cash Transfer, Climate-Smart Enhanced Public Works, and Livelihoods Programs:

• 2.3 million people gained short-term employment through climate smart public works while restoring 1.1 million hectares of degraded land and improving soil fertility
• 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 in agricultural value chains, confectionary, and trading

The $250.8 million Accelerating Sustainable and Clean Energy Access Transformation Program (ASCENT) is expanding electricity access, accelerating clean cooking adoption, and supporting universal energy access:

• 35,000 people gained access to electricity through grid and off-grid solutions (18,000 women)
• 86 schools and health facilities were electrified
• Ministry of Energy's Ngwee Ngwee Ngwee Fund has financing arrangements with private sector solar companies for large-scale deployment of solar home systems in underserved areas
• A national clean cooking initiative launched to support private sector investment and expand access to modern cooking solutions.

The $100 million Skills for a Vibrant Economy (SAVE) Project is expanding access to programs that equip students with skills aligned with priority areas.

• Nine public higher education institutions have advanced curriculum reform aligned with labor market priorities
• Industry Engagement Index increased from 5% to 74%, reflecting stronger links between institutions and industry
• Annual enrollment in degree, diploma, and certificate programs in priority areas was expanded, now more than 45,000
• Women enrolled in degree, diploma, and certificate programs increased from 38% to 40%.