Oct 15, 2025 (Nyasa Times/All Africa Global Media via COMTEX) --
Malawi's economy is in serious trouble. Prices are rising, the kwacha is weak, and the country is struggling to buy basic imports like fuel and fertilizer. Behind every statistic lies the reality that ordinary Malawians are paying the price -- through higher food costs, fewer jobs, and a shrinking sense of hope.
The country's economic growth has slowed sharply, projected at only 2.8 percent in 2025, down from an earlier forecast of 3.2 percent. Climate disasters such as droughts and floods have battered agriculture, which remains Malawi's main economic engine. The result has been reduced production, shortages of forex, and rising import costs. For a country that depends heavily on imports, this has been devastating.
Inflation has stayed dangerously high -- above 20 percent for three straight years -- and hit 28.2 percent in August 2025. Food prices keep rising because of poor harvests, while demand for goods has surged due to excess government borrowing and too much money circulating in the economy. At the same time, the budget deficit stands at 10.1 percent of GDP, while public debt has climbed to 82 percent. Simply put, the government is spending more than it earns and borrowing far beyond its means.
Malawi can no longer afford to delay action. Every day of hesitation makes the recovery harder and more expensive. The first step is fiscal discipline -- spending within our limits, cutting waste, and ensuring every kwacha counts. We need to control borrowing, improve budget management, and strengthen oversight on how public funds are used.
Malawi's problem is not that citizens pay too little tax, but that too few people are in the system. The tax base remains narrow, at only 14 percent of GDP, and nearly half of the economy operates informally. The answer is not to increase taxes on the few formal businesses, but to bring more economic players into the tax net. This requires better enforcement, tighter border controls to stop smuggling, and removal of unnecessary tax exemptions that drain government revenue.
The exchange rate remains under severe pressure because demand for dollars far exceeds supply. While in the long term the kwacha should be determined by market forces, right now sudden adjustments could worsen inflation. For stability, Malawi needs a careful, gradual approach supported by strong fiscal management and higher export earnings. Commercial banks must also return to their core business -- lending to productive sectors such as manufacturing, agriculture, and exports. Only production will generate the forex Malawi desperately needs.
Our overreliance on agriculture -- and especially tobacco -- has made Malawi dangerously vulnerable. Agriculture accounts for nearly a third of GDP, and tobacco alone still makes up almost half of total exports. This must change. Investing in irrigation, value addition, manufacturing, mining, and tourism can help spread risk and strengthen resilience to shocks such as droughts and global price changes.
Public debt is unsustainable and must be brought under control. The government has already begun talks to restructure its debt with international creditors, and some progress has been made. Continued engagement with lenders is essential to regain credibility and open room for growth. The government's intention to secure a new IMF Extended Credit Facility also sends a strong signal that it is ready to reform and rebuild confidence in Malawi's economy.
Malawi's problems are deep, but not beyond repair. What is required is honesty, discipline, and political courage. We must stop chasing quick fixes and start focusing on what builds real wealth -- production, exports, and sound financial management.
If we tighten our belts today, we can restore stability and open the path to lasting prosperity. But if we continue to ignore the warning signs, the pain will only deepen. Malawi still has a chance to recover -- but only if we act now, and act decisively.
COMTEX_469532944/2029/2025-10-15T02:42:19
by Kisu Simwaka, Deputy Governor, Reserve Bank of Malawi
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