Navigating Fiscal Headwinds: ECAMA Highlights Key Challenges to Stimulate Malawi’s Economic Growth

Key Business Points

• Malawi’s economy experienced modest growth of 2.7 percent in 2025, failing to keep pace with population growth, and was heavily dependent on rain-fed agriculture, making it vulnerable to climate and external shocks.
• Inflation remains a major concern, with food inflation driven by weak domestic production and exchange rate pass-through, and is expected to ease to between 15 and 20 percent by the end of 2026.
• Fiscal management is a significant constraint, with public debt estimated at 88 percent of GDP and interest costs nearing seven percent of GDP, making it essential for the government to restore fiscal credibility and discipline.

Malawi’s economy remained fragile in 2025, marked by modest growth, persistently high inflation, managed exchange rate volatility, and severe fiscal pressures, according to the Economics Association of Malawi (Ecama). The economy’s growth was revised downwards to 2.7 percent, which is below the six percent threshold required for meaningful poverty reduction. The growth was heavily dependent on rain-fed agriculture, leaving the economy extremely vulnerable to climate and external shocks. As the Chichewa proverb goes, "Mvula sindikufa, ndi mphamvu" (rain is life, and it’s powerful), highlighting the importance of agriculture to Malawi’s economy.

Inflation eased marginally towards the end of the year, falling to 27.9 percent year-on-year in November, but remained severely damaging to living standards. Food inflation, driven by weak domestic production and exchange rate pass-through, remained the dominant pressure. The government projected average inflation of about 28.5 percent in 2025, which is expected to ease to 20.7 percent in 2026. Forex scarcity was identified as one of the most critical challenges in 2025, with reserves remaining below two months of import cover for most of the year.

Fiscal management remained the dominant macroeconomic constraint, with the International Monetary Fund estimating Malawi’s public debt at about 88 percent of GDP. Interest costs were nearing seven percent of GDP, and although the government had projected debt to decline to around 71 percent by the end of 2025, debt distress remained severe. The fiscal deficit was still projected above seven percent of GDP, making it essential for the government to restore fiscal credibility and discipline. As Ecama president Bertha Bangara Chikadza noted, "kugwira ntchito ndi kuzipanga" (working is planning), emphasizing the need for careful planning and management of the economy.

Looking ahead, Ecama says 2026 could see modest improvement only if food supply strengthens, forex inflows rise, and fiscal credibility is restored. The association projects growth to rise to between 3.5 and 4.5 percent in 2026, and inflation is expected to gradually ease to between 15 and 20 percent by the end of 2026. However, downside risks remain significant, including another poor agricultural season, intensified forex shortages, and fiscal slippages. Minister of Finance, Economic Affairs and Decentralisation Joseph Mwanamvekha noted that Malawi’s economic growth had declined sharply over the past five years but is expected to rebound through investment in agriculture, tourism, mining, manufacturing, and digitalisation. With careful planning and management, Malawi’s economy can "kuchita bwino" (do well) and achieve sustainable growth and development.

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