Lilongwe, Malawi  The International Monetary Fund (IMF) has reiterated its call for Malawi’s government to maintain rigorous fiscal discipline and prioritise productive spending in order to stabilise its economy  a pressing message delivered following the Fund’s recent Article IV consultation with the country. IMF eLibrary+2IMF eLibrary+2

During the assessment, the IMF noted that while Malawi has experienced some revenue growth in the 2024/25 fiscal year, its vulnerability remains high owing to elevated inflation, heavy public debt, and external challenges. The deficit in the 2024/25 fiscal year stood at around 10.1 percent of GDP. IMF eLibrary+1

The IMF’s “Frequently Asked Questions” paper on Malawi emphasises that fiscal policy in countries with narrow revenue bases and high spending pressures must focus on: collecting more revenues through tax-administration reforms, ensuring expenditure is efficient and well-targeted, and protecting social outlays while avoiding unsustainable borrowing. IMF

Minister of Finance Joseph Mwanamvekha described the IMF team’s visit as a “fact-finding mission” that provided the Fund with a clearer picture of Malawi’s economic situation. He affirmed that talks have covered how to boost recovery and explore potential new IMF programmes, following the termination of the previous Extended Credit Facility (ECF) after only US$35 million of the US$175 million commitment was disbursed. Reuters+1

Key Recommendations from the IMF

• Prioritise useful spending: The IMF stresses that Malawi must focus on investment that enhances growth-potential such as infrastructure, agriculture, energy and human capital rather than consumption spending which does not yield long-term returns.

• Strengthen revenue mobilization: With high deficits and limited resources, Malawi must improve tax collection, broaden the tax base, reduce exemptions and enhance compliance. IMF eLibrary+1

• Maintain debt sustainability: Malawi’s debt remains elevated and servicing it consumes a large share of revenues. The IMF emphasizes that without better fiscal balance, debt risks worsen. Reuters+1

• Implement structural reforms: Beyond fiscal policy, reforms in governance, public financial management, and the exchange-rate regime are considered critical by the IMF to create lasting stability. IMF

Implications for Malawi

Malawi’s economy is facing multiple headwinds: inflation remained high; foreign exchange reserves were low; and growth prospects modest. The need to stabilise macroeconomics becomes more urgent as public expectations rise and external vulnerabilities persist. For this reason, the IMF’s message carries extra weight now.

What to Watch Next

• Whether Malawi secures a new IMF programme or staff-monitored arrangement that conditions support on specified reforms. Reuters reported productive talks with the Malawian government in late October 2025 about a new programme. Reuters

• How Malawi’s government starts to implement revenue reforms and public-expenditure prioritisation. Progress in these areas will be a key indicator of whether fiscal discipline is being strengthened in practice.

• Transparent publication of budget performance, debt servicing, and external-account management will also matter for investor confidence and donor support.

• The broader impact on social spending: balancing austerity or fiscal tightening with safeguarding essential public services will be a delicate challenge.