LILONGWE, February 24, 2026 — Malawi’s economy faces persistent challenges after years of high inflation, widening fiscal and external deficits, and declining exports, according to the World Bank Group’s latest Malawi Economic Monitor (MEM), Getting Reforms Right. With 270,000 young people entering the labor market annually but only around 40,000 formal jobs created, generating employment is a central challenge. The report emphasizes the need for coordinated reforms to restore fiscal and debt sustainability, resolve foreign exchange shortages, diversify exports, and improve service delivery, establishing the foundation for private sector–led job growth.
Malawi’s macroeconomic situation remains fragile. Real GDP growth is projected at 1.9 percent in 2025—below population growth—marking four consecutive years of declining GDP per capita. Fiscal deficits remain among the highest in Sub-Saharan Africa, interest payments consume nearly half of domestic revenues, and public debt is close to 90 percent of GDP, leaving the country in external debt distress. Inflation remains elevated due to high food prices and fiscal imbalances, while rising public debt continues to crowd out private sector credit. The MEM underscores that predictable policies, sustainable public finances, and access to foreign exchange are essential for stimulating private investment and employment.
The MEM’s Special Topic, Reversing Malawi’s Export Decline, highlights the deterioration of exports over the past decade and its implications for employment. High trade costs, complex licensing processes, ad hoc import and export bans, slow border procedures, and foreign exchange market distortions have reduced competitiveness, discouraged investment, and contributed to informality and illicit trade. Malawi’s export basket remains concentrated, with tobacco dominant, while product and market diversification have weakened. Opportunities exist in agro-processing, including macadamia, soybeans, and groundnuts, as well as emerging mining projects, but policy inconsistencies, foreign exchange shortages, and infrastructure constraints limit scale and job creation.
Firas Raad, World Bank Country Manager for Malawi, emphasized that stabilizing the macroeconomy and removing production and export bottlenecks can unlock new investments in agro-processing and manufacturing, creating better jobs and higher incomes. The MEM recommends strengthening fiscal discipline, increasing domestic revenue mobilization, reforming inefficient tax exemptions, prioritizing productive spending, advancing debt restructuring, and addressing foreign exchange imbalances. Additional measures include repurposing agricultural expenditures away from inefficient subsidies, deepening fiscal decentralization, expanding access to affordable electricity, and facilitating private investment in infrastructure. Investment in physical and human capital, including skills aligned with labor market demand, is essential for firms to grow and generate employment.
To reverse the export decline, the MEM calls for targeted reforms to improve trade efficiency and ensure predictability. Simplifying and digitizing import and export licensing, modernizing border management, and applying transparent, time-bound trade measures are key steps. Strengthening exports is critical not only for foreign exchange and growth but also for generating more and better jobs across the economy.
The Malawi Economic Monitor concludes that well-sequenced reforms can relieve pressures on firms, drive export growth, and place Malawi on a more resilient and inclusive growth path. With decisive implementation and strong public–private collaboration, the country can reverse the export decline, restore macroeconomic stability, and unlock private sector dynamism needed to create sustainable employment.
