LILONGWE, February 24, 2026 - After years of high inflation, widening fiscal and external deficits, and declining exports, Malawi's economy requires coordinated action to restore macroeconomic stability, reignite export-led growth, and create the jobs its citizens urgently need, according to the World Bank Group's latest Malawi Economic Monitor (MEM), Getting Reforms Right.
With 270,000 young people entering the labor market each year-but only about 40,000 formal jobs created-job creation is a central economic challenge. The report calls for accelerated progress on critical reforms to restore fiscal and debt sustainability, resolve foreign exchange shortages, increase and diversify exports, and improve service delivery-laying the foundations for private sector-led job growth.
Malawi's macroeconomic situation remains fragile. Real GDP growth is projected at 1.9 percent in 2025-below population growth-marking a fourth consecutive year of declining GDP per capita. Fiscal deficits remain among the highest in Sub-Saharan Africa, with interest payments approaching half of domestic revenues, while public debt stands near 90 percent of GDP and the country remains in external debt distress. Inflation remains elevated, driven by food prices and large fiscal deficits, while rising public debt continues to crowd out credit to the private sector.
The MEM underscores that macroeconomic stability is essential for job creation. Without predictable policies, access to foreign exchange, and sustainable public finances, private investment-the engine of employment-cannot grow at the scale Malawi needs.
The MEM's Special Topic, "Reversing Malawis Export Decline", highlights the sharp deterioration in exports over the past decade which has had implications for employment. High and unpredictable trade costs-stemming from non-tariff barriers, complex and time-consuming licensing processes that often take weeks, ad hoc import and export bans, and slow border procedures-have reduced competitiveness and discouraged firms from expanding production and hiring. Distortions in the foreign exchange market have increased uncertainty and deterred investment. As a result, goods exports as a share of GDP have declined since 2014, the number of exporting firms has fallen sharply, and many firms have shifted to informality and smuggling, fueling illicit trade. Malawi's export basket remains highly concentrated, with tobacco still dominant, while diversification has receded with fewer product lines and markets than a decade ago.
New opportunities in agro‑processing-such as macadamia, soybeans, and groundnuts-and emerging mining projects show potential to improve the economy and create jobs along the value chain. But policy inconsistencies, foreign exchange shortages, and infrastructure constraints limit scale, competitiveness, and employment generation.
"Malawi has the talent and the opportunity to turn the tide-if the country moves quickly to stabilize the macroeconomy and clear the bottlenecks that make it hard to produce and export," said Firas Raad, World Bank Country Manager for Malawi. "The MEM suggests that by simplifying trade procedures, improving border efficiency, and creating predictable policies, the country can unlock new investments in agro‑processing and manufacturing-creating better jobs and higher incomes, the very foundation of economic growth."
To stabilize the economy and support job creation, the MEM recommends strengthening fiscal discipline and increasing domestic revenue mobilization, including streamlining inefficient tax exemptions and prioritizing productive spending. It also calls for progress on debt restructuring and resolving foreign exchange imbalances to anchor inflation expectations. In line with a comprehensive jobs strategy, the report urges repurposing agricultural expenditures away from inefficient subsidies, deepening fiscal decentralization to improve local service delivery, expanding access to affordable and reliable electricity, and facilitating private sector investment in the road sector. Investment in both physical and human capital-including skills aligned with labor market demand-is essential to enable firms to grow and generate employment.
To reverse the export decline, the MEM calls for targeted reforms focused on improving trade efficiency and ensuring predictability. This includes modernizing border management through simplified and digitized import and export licensing procedures and applying transparent timebound trade measures. Strengthening export performance is not only vital for foreign exchange and growth-it is central to creating more and better jobs.
The Malawi Economic Monitor concludes that getting reforms right-and sequencing them well-can quickly ease pressures on firms, drive export growth, and place the economy on a more resilient and inclusive growth path. With decisive implementation and strong public-private collaboration, Malawi can reverse the export decline, rebuild stability, and unlock the private sector dynamism needed to generate more and better jobs.
