Malawi’s economy is beginning to show signs of stabilisation, with the latest World Bank Malawi Economic Monitor (MEM) pointing to improvements in fiscal management, economic growth, poverty and agricultural production.
The World Bank’s September 2026 Malawi Economic Monitor, titled “Building Stability to Unlock Growth,” says recent fiscal consolidation efforts have begun to yield results, although the recovery remains fragile and further reforms are needed for ordinary Malawians to feel a meaningful improvement in their living standards.
The developments come against the backdrop of government interventions aimed at strengthening fiscal discipline, improving revenue collection, controlling expenditure and creating conditions for private-sector-led growth.
One of the notable developments is the government’s effort to bring public finances under greater control.
According to the World Bank, Malawi’s fiscal deficit narrowed to 8.8 percent of GDP in FY2025/26, supported by expenditure controls, tax reforms and stronger revenue administration.
The shift is significant after years of large fiscal deficits and heavy borrowing, which had contributed to rising public debt and reduced the availability of credit to businesses.
Government’s efforts to reduce borrowing and align expenditure with available resources are therefore beginning to provide some measure of fiscal stability.
The economy is also showing modest signs of recovery.
Economic growth has reached around 2.7 percent, compared with population growth of approximately 2.6 percent. This represents an important change after several years in which economic growth failed to keep pace with population growth.
However, the World Bank cautions that growth remains too weak to generate enough jobs and significantly improve living standards.
The latest figures also point to some improvement in poverty indicators, while inflation has moderated from the exceptionally high levels recorded previously.
Inflation has fallen from the levels seen during the height of the economic crisis, although it remains elevated and continues to put pressure on household incomes, particularly through food prices.
The government’s broader stabilisation measures are therefore beginning to create some space for economic recovery, even though the benefits are not yet being felt equally across the population.
Agriculture, which remains the backbone of Malawi’s economy and the main source of livelihoods for millions of people, has also recorded an improvement.
Government interventions in agriculture, including support for farmers and agricultural inputs, have contributed to efforts to restore production, although the World Bank continues to warn that Malawi needs to move beyond low-productivity agriculture and strengthen commercialisation, irrigation, resilience and export-oriented production.
Despite the progress, the World Bank warns that Malawi’s recovery remains fragile.
Income inequality has increased, while food poverty remains a major concern. Public debt remains exceptionally high, and the country continues to face significant external imbalances.
The trade deficit has widened as imports, particularly fuel and fertiliser, continue to outpace exports. Foreign-exchange shortages and distortions in the foreign-exchange market are also constraining businesses and limiting access to essential imports. (World Bank)
The World Bank further notes that unreliable electricity, weak domestic supply chains and a difficult business environment continue to restrict investment, productivity and job creation.
The World Bank says Malawi needs to maintain the reform momentum.
Its recommendations include stronger fiscal discipline, increased domestic revenue mobilisation, debt restructuring and measures to address foreign-exchange market distortions.
The Bank also calls for policies that enable businesses to expand and invest, strengthen exports and improve the overall investment environment.
Another major area highlighted is the management of State-Owned Enterprises (SOEs).
The World Bank says many SOEs remain financially fragile and dependent on government support, creating fiscal risks. It recommends stronger governance, greater transparency, skilled and independent boards, improved revenue collection and better debt management. (World Bank)
The latest assessment provides evidence that government interventions to restore fiscal discipline and stabilise the economy are beginning to produce measurable results.
But the World Bank’s message is equally clear: stabilisation is only the beginning.
For Malawians to experience the recovery through better incomes, more jobs, affordable food, reliable electricity and improved public services, the government will need to sustain the reforms while accelerating private-sector investment, export growth, agricultural productivity and the restructuring of financially troubled state-owned enterprises.
Malawi may therefore be moving in the direction of economic recovery, but the critical test will be whether the emerging macroeconomic improvements translate into better living standards and economic opportunities for ordinary citizens.
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