Malawi’s economic recovery remains fragile due to the slow implementation of macroeconomic adjustment reforms and a series of recent shocks. Low growth and high inflation underscore Malawi’s economic vulnerability. GDP is expected to have grown by only 1.8% in 2024, a downward revision from 2.0% growth projected in April 2024. With the population growth rate at 2.6%, this marks the third straight year of declining GDP per capita. The El Niño-induced drought in early 2024 has adversely affected agricultural output, which is expected to have contracted by 2.0% in 2024. Inflation is gradually easing but remains high due to rising food, housing, and utility prices, as well as the rapid growth of the money supply. This is according to the Malawi Economic Monitor, 20th Edition, The Rising Cost of Inaction with a special topic, Unlocking the Potential of Malawi’s Mining Sector.
Food insecurity remains a major concern due to weak harvests from 2022 to 2024 and the likelihood of a challenging 2024-25 season. Approximately 5.7 million people—or 28% of the population—are expected to face crisis-level food insecurity between October 2024 and March 2025. In 2023, 4.4 million people experienced acute food insecurity, due in part to continued challenges around access to inputs, as well as the impact of Cyclone Freddy, which disrupted agricultural production in the southern region. Limited fertilizer availability, including for beneficiaries of the AIP, may negatively impact the 2024-25 agricultural season. By the start of the planting season in December 2024, only 23.8% of the required 105,000 MT of fertilizer had been accessed.
Reform momentum has stalled, while fiscal and external imbalances continue to increase, and the cost of inaction is rising. Continued delays in addressing widening fiscal and current account deficits increase the scale of the eventual adjustment and heighten the risk of further deterioration. Conversely, implementing announced stabilization and adjustment reforms could enable the Malawian economy to achieve significantly higher growth rates over the next five years, as planned large-scale investments materialize. These investments would create numerous jobs, boost exports and revenues, and catalyze further FDI.
The 20th edition of the Malawi Economic Monitor (MEM) outlines urgent policy measures needed to realize Malawi’s significant medium-term growth potential and avoiding a further weakening of the economy. The focus should be on:
- Restoring macroeconomic stability: Planned macro-fiscal reforms must be fully implemented and sustained over time, with a focus on returning to fiscal consolidation targets both in the current year and FY2025/26, finalizing external debt restructuring and containing the growth of domestic borrowing, supporting the accumulation of reserves by implementing announced exchange-rate reforms, and controlling inflation by limiting the growth of the money supply and halting the monetary financing of the fiscal deficit.
- Creating the conditions for increased private investment and exports: Increasing investment is critical for the sustainable growth of the economy. In a context of limited fiscal resources, the success of the Agriculture Tourism and Mining Strategy will be determined by whether the private sector is willing to invest and whether more is done to ensure that the limited public funds are used well. Key measures include eliminating implicit fuel and energy subsidies to reduce the risk of shortages, developing an effective management system for mining revenues, and phasing out foreign-exchange surrender requirements.
- Building resilience and protecting poor households: With domestic food production continuing to fall far short of consumption, it will be important to advance the process of reforming the AIP and repurposing agriculture expenditure towards more activities that increase productivity and resilience. Fully implementing the Disaster Risk Management (DRM) Act, including the DRM Fund, and finalizing and implementing the Energy Compact will be vital to strengthen disaster preparedness and enable investments in affordable energy access.
The MEM’s Special Topic section focuses on Malawi's mining sector, outlining how the country’s wealth of energy transition minerals (ETM) carries enormous potential for accelerating broad-based economic growth over the coming decades. The global shift towards renewable energy and electrification has led to a surge in demand for minerals such as graphite, titanium, uranium, and rare earth elements, all of which are found in abundance in Malawi. Malawi’s wealth of ETM could provide vast development opportunities, but only if key constraints are addressed. Despite its vast potential, major challenges hinder the development of Malawi’s mining sector. Improving the environment for mining investment would significantly alleviate fiscal pressures, stimulate economic growth, create high-quality jobs, and potentially kickstart a broader virtuous cycle of investment and growth. To capitalize on this strategic opportunity, the MEM recommends that the Malawi Government moves expeditiously to strengthen the legal, regulatory and institutional framework of the mining sector as well as its human resource capacity.
The MEM recommends reforms that are prioritized according to the “grow, protect, and benefit” approach, which is designed both to attract greater investment and to increase the mining sector’s impact on the country’s development. The reform recommendations include: (i) adopting well-informed policies to enable the sustained growth of the mining sector; (ii) boosting the Government’s institutional capacity including the Malawian Environmental Protection Authority (MEPA) to ensure effective social and environmental protection; and (iii) ensuring there is an efficient, effective, and transparent system to manage mining revenues for the benefit and economic welfare of the Malawian people.
Malawi has a unique opportunity to leverage its mineral wealth to drive sustainable economic development. By addressing the challenges and prioritizing the actions outlined in the MEM’s Special Topic section, the government can create a modern and fit-for-purpose framework for the mining sector that attracts greater investment, boosts domestic revenue, and ensures a broad and equitable distribution of benefits.