The African Sovereign Debt Justice Network has expressed concerns that Malawi's worsening debt profile could have far-reaching implications for the country's economic sustainability. According to the network's September 2026 report, securing a new International Monetary Fund programme will not resolve the country's debt problems on its own. The network, comprising citizens, scholars, civil society actors, and church groups, has called for fiscal consolidation, stronger public finance management, and improved governance.
Malawi's public debt reached K23.9 trillion, approximately 90 percent of gross domestic product, by December 2025. This has put further pressure on public finances and debt servicing. The joint 2025 World Bank/IMF Debt Sustainability Analysis continues to classify Malawi's external and overall public debt as being in distress, consistent with its November 2023 assessment. The analysis indicated that Malawi needs a primary deficit of about one percent of GDP to stabilise debt in the near-term.
The IMF considers public borrowing sustainable when debt remains below 50 percent of GDP, with domestic and external borrowing not exceeding 20 percent and 30 percent of GDP, respectively. Economics Association of Malawi president Bertha Bangara-Chikadza attributed the debt crisis to persistent fiscal deficits, driven by low revenues and high recurrent expenditure, particularly wages, subsidies, and interest payments. She emphasised the need for stronger revenue mobilisation and tighter control of recurrent spending.
Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamvekha acknowledged that the high debt burden remains one of the fiscal challenges facing the economy. He stated that the government will address it through the five-year National Economic Recovery Plan. The plan aims to restore macroeconomic stability and promote economic growth. Mwanamvekha expressed confidence that the government has indicated what needs to be done and how it will achieve that.
A global credit insurance firm, Coface, has warned that the Malawi Government is at high risk of a new debt default as talks to restructure external commercial debt progress slowly. The firm noted that domestic debt, which accounts for about 60 percent of total public debt, is growing as the government increasingly turns to the domestic market after defaulting on external commercial creditors. This development has raised concerns about the country's ability to service its debt.
The African Sovereign Debt Justice Network's report emphasised that the success of future reforms will depend not only on technical policy design but also on political commitment and institutional capacity to implement agreed measures consistently over time. The network's warning comes as development partners and financial institutions raise questions about future financing options and long-term economic sustainability.
The Extended Credit Facility, a four-year $175 million programme, was terminated on May 15 after running for 18 months without reviews. Debt restructuring and reducing the high domestic interest bill are among the key outstanding challenges. The government faces significant hurdles in addressing the country's debt distress and restoring macroeconomic stability.
Key points
- Malawi's public debt reached K23.9 trillion, approximately 90 percent of GDP, by December 2025.
- The IMF considers public borrowing sustainable when debt remains below 50 percent of GDP.
- The government will address the high debt burden through the five-year National Economic Recovery Plan.
