IMF Executive Board Concludes 2025 Article IV Consultation with Malawi
IMF News, July 22, 2025
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- Published: July 22, 2025
Macroeconomic context and recent developments
- Economic activity in 2024: real GDP growth declined to 1.8 percent from 1.9 percent in 2023.
- Factors weighing on 2024 performance: lower-than-expected agricultural output and critical foreign exchange shortages.
- Exchange rate policy: official exchange rate against the US dollar fixed since April last year, largely erasing benefits of the November 2023 devaluation.
- Inflation dynamics:
- Peak: 30.7 percent year-over-year in February 2024.
- May 2025: eased to 27.7 percent in the context of the harvest season.
- Drivers: high food prices, elevated money growth, wide official-parallel exchange rate spread.
- Fiscal position:
- Overall fiscal deficit in FY2024/25: 10.1 percent of GDP (due to lower-than-projected revenues, election-related spending, and increasing interest bill).
- 2023 Extended Credit Facility (ECF) automatically terminated on May 14, 2025 after eighteen months since approval without completing a review.
- External sector and reserves:
- Current account deficit worsened significantly on elevated import demand.
- Gross official reserves: 149 (2024), 118 (2025) [US$ millions].
- Months of imports: 0.4 (2024), 0.3 (2025).
- Net international reserves: -1,216 (2024), -2,027 (2025) [US$ millions].
- Public debt and interest burden:
- Total public debt reached 88 percent of GDP by the end of 2024 (table reports 87.6 percent for 2024 and 80.2 percent for 2025).
- Interest bill on public debt is estimated to be approaching 7 percent of GDP.
Medium-term outlook and risks
- Growth projections:
- 2025: 2.4 percent.
- Medium-term increase to 3.4 percent by 2029.
- Inflation outlook: expected to remain high, stabilizing at around 15 percent over the medium term.
- Primary deficits: expected to persist, contributing to inflationary trends.
- Downside risks:
- Continuation of loose macroeconomic policies.
- Greater-than-expected reduction in donor support.
- Persistent trade tensions.
- Social unrest surrounding the elections.
- Lower food production.
- Upside risks:
- Mining investment.
- Change in policy direction with a strong reform agenda to stabilize the macroeconomy.
Executive Board assessment and policy recommendations
- Overall assessment:
- Malawi is at a critical juncture with high inflation, unsustainable fiscal and debt outlook, FX shortages, and fuel scarcity.
- Significant downside risks warrant decisive and urgent policy action.
- Fiscal policy recommendations:
- Fiscal consolidation focused on domestic revenue generation is essential to reduce inflationary pressures and improve debt sustainability.
- Urged tax policy and revenue administration reforms to broaden the tax base.
- Contain the interest and wage bills while rebalancing expenditures toward infrastructure, human capital investment, and social protection.
- Improve public financial management to enhance expenditure control and budget execution.
- Strengthen state owned enterprises.
- Adopt a credible medium term fiscal framework to anchor fiscal sustainability.
- Take decisive steps to restore public debt sustainability within a medium-term adjustment program.
- Complete external debt restructuring and address the high cost of domestic borrowing.
- Strengthen debt management and secure concessional financing.
- Monetary and financial sector recommendations:
- Tighten monetary policy stance to reanchor inflation expectations, supported by fiscal adjustment to eliminate deficit monetization.
- Fully implement the Safeguards Assessment recommendations to support central bank independence and monetary policy implementation.
- Vigilance and proactive management of financial sector risks, including FX exposure and the sovereign–bank nexus.
- Prudent fiscal policy to support financial sector stability and reduce crowding out of the private sector.
- Exchange rate and reserves:
- Move to a unified market-clearing exchange rate seen as integral to macroeconomic stability and accelerating growth under a broader adjustment program.
- A more flexible, market-determined rate would help absorb shocks and rebuild foreign reserves.
- Careful sequencing, communication, and proactive mitigation of social and financial impacts recommended for a successful transition.
- Governance and structural reforms:
- Advance governance and structural reforms to improve the investment climate and promote economic diversification.
- Reduce economic distortions and regulatory burdens and advance the fight against corruption.
- Enhance transparency; publish the 2024 Governance Diagnostic Assessment.
- Strengthen the AML/CFT framework and address data gaps.
- Cooperation and sequencing:
- Building domestic support for reforms is crucial.
- Active engagement with the Fund and donor partners is important to support reform efforts and learn lessons from past experience.
Key selected economic indicators (2023–25) — headline figures from the staff table
- GDP at constant market prices:
- 2023 actual: 1.9
- 2024 est.: 1.8
- 2025 proj.: 2.4
- Nominal GDP (billions of Kwacha):
- 2023: 15,475
- 2024: 20,322
- 2025: 25,956
- GDP deflator:
- 2023: 27.7
- 2024: 29.9
- 2025: 25.3
- Consumer prices (end of period):
- 2023: 34.5
- 2024: 28.1
- 2025: 25.4
- National savings (percent of GDP):
- 2023: -5.5
- 2024: -9.2
- 2025: -5.7
- Gross investment (percent of GDP):
- 2023: 11.8
- 2024: 12.7
- 2025: 9.0
- Central government revenue (percent of GDP, fiscal year basis):
- 2023: 17.2
- 2024: 18.5
- 2025: 19.1
- Expenditure and net lending (percent of GDP):
- 2023: 27.5
- 2024: 29.1
- 2025: 29.2
- Overall balance (including grants, percent of GDP):
- 2023: -10.3
- 2024: -10.6
- 2025: -10.1
- Foreign financing (percent of GDP):
- 2023: 3.3
- 2024: 1.3
- 2025: 1.1
- Total domestic financing (percent of GDP):
- 2023: 7.0
- 2024: 7.2
- 2025: 9.1
- Broad money (change in percent of broad money at end period):
- 2023: 45.1
- 2024: 36.7
- Net foreign assets (change in percent of broad money):
- 2023: -19.8
- 2024: -11.2
- 2025: -2.3
- Net domestic assets (change in percent of broad money):
- 2023: 52.0
- 2024: 56.3
- 2025: 39.0
- Net claims on the government (change in percent of broad money):
- 2023: 46.6
- 2024: 50.1
- 2025: 32.7
- Credit to the private sector (percent change):
- 2023: 17.6
- 2024: 29.3
- 2025: 19.9
- External sector (US$ millions):
- Exports (goods and services): 1,521 (2023), 1,433 (2024), 1,531 (2025)
- Imports (goods and services): 3,984 (2023), 4,204 (2024), 4,249 (2025)
- Gross official reserves: 201 (2023), 149 (2024), 118 (2025)
- Current account overall balance (percent of GDP):
- 2023: 0.7
- 2024: -0.1
- 2025: -5.9
- Total public debt (percent of GDP):
- 2023: 83.6
- 2024: 87.6
- 2025: 80.2
- External debt service (percent of exports):
- 2023: 11.6
- 2024: 11.7
- 2025: 64.0
- External debt service (percent of revenue excl. grants):
- 2023: 9.9
- 2024: 45.7
IMF Press Release No. 25/261, July 22, 2025.