Key Business Points
- Rising public debt: Malawi’s public debt has surged by K800 billion to K22.4 trillion in September 2025, posing significant pressure on the national budget, with interest payments alone reaching K2.27 trillion in the 2025-26 fiscal year.
- Debt management strategy: The government intends to re-profile its domestic debt obligations as part of a broader debt management strategy, including strengthened domestic revenue mobilisation and identifying options to provide fiscal relief while safeguarding financial sector stability.
- Fiscal reforms: International institutions recommend introducing spending controls, rolling out tax reforms, and updating Malawi’s Medium-Term Debt Strategy to reflect the growing domestic debt burden and align annual borrowing plans with the Public Finance Management Act of 2022.
Malawi’s public debt has increased significantly, reaching K22.4 trillion in September 2025, up from K21.6 trillion in June. This surge in debt is largely driven by interest payments, which accounted for K2.27 trillion in the 2025-26 fiscal year. According to Director of Economic Affairs Elsie Salima, domestic debt now accounts for 65% of the total public debt stock, placing substantial pressure on the national budget. With interest payments and wages and salaries factored in, domestic revenues are almost exhausted.
The Reserve Bank of Malawi Director of Economic Policy and Research, Mark Lungu, attributes the rising debt to economic shocks, including exchange rate adjustments, which have increased the Kwacha value of external debt. He notes that while no new external borrowing has occurred since 2021, the revaluation of external debt due to exchange rate movements has contributed to the increase in debt levels. Domestic debt has also increased as the government responds to repeated disasters, such as cyclones, El Niño, and food shortages.
Finance Minister Joseph Mwanamvekha emphasizes the need for tough policy decisions to contain rising public debt, including strengthening domestic revenue mobilisation and ending deficit budgets financed through borrowing. The government is working to re-profile its domestic debt obligations and is auditing promissory notes issued through out-of-court settlements to verify their authenticity.
International institutions, including the African Development Bank, World Bank, and United Nations, have outlined eight measures to help Malawi regain debt sustainability. These measures include tightening expenditure controls, rolling out tax reforms, and updating Malawi’s Medium-Term Debt Strategy. The institutions recommend introducing spending controls, such as hiring freezes for non-essential positions and limits on domestic and international travel, as well as abolishing discretionary VAT exemptions on non-food items and pausing new tax incentives. Zinthu zofunika kufunzidwa, or key areas that need attention, include restricting new external borrowing to concessional financing and developing strategies to lower the domestic interest bill.
To address the growing domestic debt burden, the government is urged to resume negotiations with external commercial creditors and develop strategies to ease interest costs and free up resources for priority investments. Over the medium term, the institutions advise closer engagement with domestic creditors, automating wage and pension management, and strengthening budgeting processes. Kutengera nthaka, or fiscal discipline, is crucial to reducing the debt-to-GDP ratio and creating fiscal space for growth-oriented investments. By implementing these measures, Malawi can work towards achieving tsogolo lachisoni, or a sustainable future, for its economy and citizens.
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