“The aid withdrawal means the country has to prioritise the little revenue locally generated to repay loans at the expense of service delivery,” said Willy Kambwandira of the Centre for Social Accountability and Transparency.
Malawi is one of six countries with unsustainable debt levels, according to the International Monetary Fund’s (IMF) February 2025 list.
Public sector debt rose from 48 to 93 percent of GDP between March 2020 and March 2024, according to government figures cited in an IMF report this month.
“Fiscal pressures that have contributed to this rise include spending to combat the Covid-19 pandemic and the aftereffects of three cyclones, high inflation, and rising foreign exchange rates,” it said.
Little left over
Structural weaknesses and fiscal mismanagement have contributed to Malawi’s economic woes, said university lecturer Bertha Chikadza, president of the Economics Association of Malawi.
For example, tobacco dominates exports, making up 60 percent, and price slumps for the crop have cut foreign exchange earnings.
“With little or no diversification in export earnings, the country has had persistent trade deficits,” she said.
Debt servicing consumes about half of domestic revenue, leaving little for health, education and other critical sectors, Chikadza said.
With inflation of 28.5 percent this year pushing up prices, Malawians have taken to the streets in protest in several cities.
Government coping measures, including cutting public spending and raising taxes, have been deeply unpopular.