Revitalizing Malawi’s Economy: Tackling Climate Related Underfunding for Sustainable Growth

Key Business Points

• Climate change mitigation is crucial for Malawi’s economic growth, with the country currently losing 1.7% of its GDP annually due to climatic shocks, emphasizing the need for strategic investment in this area.
• Allocating 5% of the national budget to climate financing, as recommended by the Malawi Economic Justice Network (Mejn), could help cushion the economy from the growing costs of climate change impact, supporting sustainable development.
• Diversifying funding sources is essential to meet the required projected needs of $46 billion by 2040, with only 24% of the total funding expected to be covered by domestic resources, highlighting the importance of international partnerships and private sector investment.

The Malawi Economic Justice Network (Mejn) has expressed concern over the less than one percent climate financing allocation to the national budget, stating that it is too low to shield the economy from the growing costs of mitigating climate change impact. Mejn regional manager (South) Marvin Banda emphasized the importance of prioritizing the environment and climate change sector with financial resources, which has a double benefit of reducing impacts from climate-induced disasters and restoring Malawi’s natural capital. This is in line with the Malawi 2063 First 10-Year Implementation Plan, which recognizes the essence of environmental sustainability to realize the goals in agriculture commercialisation and industrialisation.

The Malawi Country Climate and Development Report estimates that the country will likely experience a three to nine percentage point loss in GDP by 2030 and an 8-16 percentage loss by 2050 if it stays on its current low-growth development trajectory. This highlights the need for proactive measures to address climate change impacts, including climate-resilient infrastructure and climate-smart agriculture. Furthermore, Unicef data shows that between 2010 and 2025, Malawi experienced 19 major flooding events, a rainfall-related landslide, three severe droughts, and five storm disasters, resulting in significant economic losses and humanitarian crises.

The estimated budget for environment and climate management in 2025/26 has declined in nominal terms by 37 percent, from K282 billion in 2024/25 to K177 billion in 2025/26. This decline in funding compromises the country’s ability to address climate change impacts, emphasizing the need for sustainable financing mechanisms. In Chichewa, this can be referred to as "kugawa kwa njira za uwongo", highlighting the importance of transparent and accountable funding allocation. Compared to 2024/25, the share of public climate finance in Malawi’s 2025/26 budget has declined both as a proportion of the total government budget and GDP, falling from 4.7 per cent to 2.2 per cent of total government budget and from 1.5 per cent to 0.7 per cent of GDP, respectively.

Considering the current financing trajectory, available resources will fall short of meeting the required projected needs of $46 billion by 2040, as outlined in the Malawi’s National Adaptation Plan Framework and the Nationally Determined Contribution. This emphasizes the need for innovative financing solutions, including public-private partnerships and climate financing instruments, to support Malawi’s climate change mitigation and adaptation efforts. As the country moves forward, it is essential to prioritize climate-resilient development, ensuring that businesses and communities are equipped to thrive in a changing climate, and that zinthu zopusazi (business opportunities) are created to support conomic growth and sustainable development.

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