Yesterday, the World Bank released a report on the state of our economy full 128 pages. For those who may have missed it, here is a clear summary of what the report is saying, just to make sure you stay informed.
1. Malawi is facing its worst economic crisis in many years.
The economy has been shrinking, prices have been rising by about 30 percent, and more than 75 percent of Malawians now live in extreme poverty.
2. The government has been spending more money than it collects for many years.
Malawi’s budget deficit is one of the highest in Africa, and it keeps breaking the SADC rule that says a country should not go beyond a 3 percent deficit.
3. Malawi’s public debt is too high and cannot be sustained.
By 2024, the country owed money equal to 90.9 percent of everything it produces. The Reserve Bank also lost huge amounts of money because of foreign exchange problems, including MWK 708.7 billion in 2023 and MWK 200.4 billion in 2022.
4. Government spending has almost doubled, but services have not improved.
Spending increased from 16 percent of GDP in 2011/12 to 31 percent in 2024/25. However, many projects are delayed or poorly managed, and only about 75 percent of development projects are completed.
5. The wage bill for government workers has grown very fast.
It was less than 3 percent of GDP in the early 2000s, but it is now above 6 percent. Malawi’s government workers earn about 49 percent more than people in similar jobs in the private sector.
6. State-owned companies are struggling and cost the government a lot of money.
In 2023 they made a profit of MWK 543 billion, but in 2024 they made a loss of MWK 47.63 billion. ESCOM and Blantyre Water Board are among the worst performers, and their debts and unpaid bills keep growing.
7. Fuel and electricity subsidies mostly help the rich, not the poor.
The richest 20 percent of people benefit the most from fuel subsidies. Delays in adjusting fuel prices between 2023 and 2025 also created large debts for fuel suppliers.
8. Malawi collects more tax today than ten years ago, but still not enough.
Tax makes up about 15 percent of GDP, which is below the government target of 17 percent. The country loses around 1.4 percent of GDP every year because of too many tax incentives and exemptions.
9. Mining will bring some money, but it will not change everything.
If all mining projects succeed, Malawi may get between US$200 million and US$500 million a year by the early 2030s. Projects include Kayelekera uranium, Kasiya rutile and Kangankunde rare earth minerals.
10. Malawi must choose to reform now or face a deeper crisis.
If reforms happen, the country could move from a deficit to a surplus within two years and reduce its debt. But if nothing changes, debt could grow to 143 percent of GDP by 2035, and the economy will suffer even more.
