Malawi has the potential to restore confidence in its public finances, protect vulnerable populations, and attract private capital investment to support the ambitions of “Malawi Vision 2063” through a credible reform package focused on fiscal consolidation, according to a recent Public Finance Review report by the World Bank Group. The report, titled Restoring Stability, Rebuilding Trust, provides a forward-looking assessment of the country’s fiscal situation, noting that Malawi faces rising fiscal imbalances, high inflation, and mounting debt, all of which have constrained economic and social development outcomes. The review highlights a severe macro-fiscal crisis, with one of the region’s highest fiscal deficits averaging 11.9 percent of GDP from 2022 to 2024 and public debt nearing levels last seen before the HIPC completion point in 2006.
The report identifies rigid budget structures as a major challenge, with wages, debt servicing, pensions, gratuities, and statutory transfers consuming nearly all domestic revenues and limiting spending on priority development projects. Public financial management faces bottlenecks in government investment projects and procurement, compounded by delays in implementing the Integrated Financial Management Information System (IFMIS) and e‑GP systems. Weak project appraisal and selection processes result in low-quality investments, while climate vulnerability, disaster recovery needs, and underfunded social sectors such as education, health, and social protection continue to place additional pressure on the budget, which also relies heavily on declining external financing.
Malawi’s mining sector offers significant potential to support public finances, though it is unlikely to generate excessive revenue windfalls. The report notes that seven projects producing energy transition minerals could generate between US$200 million and US$500 million annually by the early 2030s, depending on the operations of these projects and the fiscal terms agreed with investors.
The review outlines a practical roadmap for stabilizing public finances while accelerating inclusive growth. Sustained government leadership and broad stakeholder support can enable Malawi to transform its current fiscal challenges into opportunities for reform, protecting essential services, strengthening institutions, and encouraging private investment.
To achieve stability and rebuild trust, the report calls for balanced fiscal consolidation that safeguards social and infrastructure spending while improving government efficiency. On the revenue side, it recommends rationalizing tax incentives, removing non-essential VAT exemptions, and accelerating digitalization to enhance compliance. Completing IFMIS optimization and strengthening Parliamentary oversight are emphasized as crucial steps for transparency and expenditure control. Over the long term, improved debt management will be essential to reducing fiscal vulnerabilities and restoring fiscal space.
