The Executive Board of the International Monetary Fund (IMF) has concluded the Article IV consultation with Malawi, assessing the country’s recent economic developments, challenges, and policy priorities.
Malawi remains under significant macroeconomic strain due to external shocks, structurally low growth, high inflation, and unsustainable fiscal and debt trajectories. The economic slowdown deepened in 2024 as real GDP growth fell to 1.8 percent from 1.9 percent in 2023, driven by weaker-than-expected agricultural performance and acute foreign exchange shortages. The fiscal deficit widened to 10.1 percent of GDP in FY2024/25 amid shortfalls in revenue, election-related spending, and rising interest obligations.

The Directors stressed that fiscal consolidation, focused on domestic revenue generation, is essential to reduce inflationary pressures and improve debt sustainability. They urged tax policy and revenue administration reforms to broaden the tax base.
Inflation remains elevated, peaking at 30.7 percent year-over-year in February 2024, before declining to 27.7 percent by May 2025 due to seasonal harvest effects. The fixed exchange rate regime, in place since April 2024, has eroded gains from the 2023 devaluation and widened the gap between official and parallel market rates. Public debt reached 88 percent of GDP by the end of 2024, with interest payments approaching 7 percent of GDP, underscoring fiscal vulnerability.
Malawi’s medium-term outlook remains modest. Growth is projected to rise gradually to 3.4 percent by 2029, while inflation is expected to stabilize around 15 percent due to ongoing monetary and exchange rate pressures. Fiscal deficits are forecast to persist, with downside risks including further donor withdrawal, loose macroeconomic policies, election-related instability, and potential food supply shocks. However, sustained mining investments and policy reforms could offer upside potential.
Executive Board Assessment
Executive Directors concurred with the staff’s appraisal and emphasized the urgency of comprehensive and credible reforms. They noted that Malawi stands at a crossroads, facing high inflation, fuel and FX shortages, and unsustainable debt. Directors called for bold fiscal consolidation focused on increasing domestic revenue, alongside expenditure rebalancing toward human capital, infrastructure, and social protection.
They highlighted the need for credible medium-term fiscal planning and stronger public financial management, including reforms to state-owned enterprises. Directors urged the authorities to finalize external debt restructuring, curb the cost of domestic borrowing, and secure concessional financing.
To anchor inflation expectations, the IMF recommended tightening monetary policy and ending deficit monetization. Directors also encouraged full implementation of safeguards to support central bank independence and called for strengthened financial sector oversight.
A unified, market-clearing exchange rate was deemed essential for macroeconomic stability. A more flexible regime would help rebuild reserves and enable the economy to better absorb external shocks. Directors advised sequencing reforms carefully and addressing their social impacts proactively.
Structural and governance reforms were also underscored, particularly measures to reduce economic distortions, combat corruption, and improve transparency. Directors welcomed progress toward publishing the 2024 Governance Diagnostic Assessment and urged strengthened efforts to close data and AML/CFT gaps.
The next Article IV consultation with Malawi is scheduled for mid-2026, following the standard 12-month review cycle.