Malawi’s Debt Risk: A Strategic Opportunity for Business Leaders

Key Business Points

• Malawi faces a high risk of new debt default as restructuring talks with external creditors move slowly, pushing the government to borrow more from the domestic market at high interest rates.
• Public debt has surged to K24.33 trillion by end-December 2025, with the debt-to-GDP ratio rising to 93.2 percent, placing growing pressure on the national budget.
• Debt restructuring remains the gateway to fiscal space, but progress with commercial creditors like TDB and Afreximbank remains stalled, creating uncertainty for investors and entrepreneurs.

Global risk analysts at Coface, a French credit insurance firm, have issued a stark warning that Malawi is at high risk of defaulting on its debts again. The firm noted that Malawi has already defaulted on its external commercial creditors, primarily the Trade and Development Bank (TDB) and the African Export-Import Bank (Afreximbank). As a result, the government has been forced to lean heavily on the domestic banking market, where borrowing costs remain steep at around six percent real yield on average for three-year loans.

Coface highlighted that domestic debt now makes up about 60 percent of total public debt, reflecting how the government increasingly turns inward to fund operations. The Reserve Bank of Malawi holds 30 percent of this domestic debt, adding further strain to the central bank.

The numbers paint a clear picture of mounting pressure. Ministry of Finance data show that Malawi’s total public debt rose from K19.18 trillion at end-March 2025 to K24.33 trillion by end-December 2025. During the same period, the debt-to-GDP ratio climbed from 91.5 percent to 93.2 percent, showing that borrowing is outpacing economic growth.

While Malawi completed a partial restructuring of bilateral debt in 2024 through agreements with China and Kuwait, the remaining bilateral debt sits at just eight percent of external debt, mostly owed to China Exim Bank. The larger obstacle is that over 60 percent of Malawi’s external debt is multilateral and not currently subject to restructuring, including loans from the World Bank and the African Development Bank.

The International Monetary Fund stated clearly in November 2023 that Malawi’s economic recovery efforts will count for nothing unless the country secures debt forgiveness on roughly $976 million owed to commercial and bilateral creditors. The Reserve Bank of Malawi recently confirmed that about K1.27 trillion owed to TDB and Afreximbank remained in arrears at the end of 2025, even as talks continue years after they began.

ODI Global, a UK-based think-tank, noted that Malawi, Zambia, and Ghana are all struggling to finalize restructuring deals with Afreximbank and TDB, because both banks argue their loans should be excluded from restructuring, similar to World Bank and AfDB loans.

Economist Velli Nyirongo warned that these arrears damage Malawi’s creditworthiness and its appeal to investors, potentially driving up borrowing costs and limiting future financing. For local entrepreneurs and business owners, this matters because a weak credit standing translates into fewer opportunities and higher costs for everyone.

Finance Minister Joseph Mwanamvekha, in the 2026/27 National Budget Statement, acknowledged that managing the current debt stock is a major constraint but expressed confidence that restructuring would create the fiscal space needed. For Malawi’s business community, this is the moment to watch closely. The chuma of the national economy depends on meaningful progress in these negotiations, and every entrepreneur should factor this risk into long-term planning. The time to prepare for what comes next is now.

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