The International Monetary Fund (IMF) has called for further fiscal and monetary tightening as a prerequisite for Malawi to secure a new programme. The IMF team, led by mission chief Justin Tyson, stated that Malawi needs to sustain medium-term fiscal consolidation while strengthening and tightening monetary policy. This call has raised concerns among economists, who warn that it may undermine investment and recovery in the country.
The IMF team visited Malawi between September 22 and October 6 and noted that the country has made progress on major reforms to restore macroeconomic stability under the National Economic Recovery Plan (Nerp). The team also observed that domestic revenue is increasing while expenditure has been tightly controlled, in line with the K10.9 trillion 2026/27 National Budget targets. However, the IMF mission did not announce a staff-level agreement, stating that discussions will continue to finalise the policy package.
Economists have expressed concerns over the potential impact of further fiscal and monetary tightening on the economy. Scotland-based Malawian economist Velli Nyirongo stated that while further fiscal consolidation is necessary, the composition of the adjustment is crucial. He suggested that the government should target inefficient and non-essential spending, strengthen revenue mobilisation, and improve public financial management rather than disproportionately cutting productive investment and essential social services.
Nyirongo also cautioned that tighter monetary policy should not automatically translate into substantially higher interest rates. He recommended that the Reserve Bank of Malawi (RBM) maintain sufficiently restrictive conditions to contain inflation and stabilise expectations, but avoid aggressive tightening that could increase financing costs and suppress credit demand. University of Malawi economics lecturer Edward Leman shared similar concerns, stating that monetary policy has already tightened sufficiently and that further tightening could affect investment and economic growth.
Leman suggested that significant gaps remain in fiscal consolidation, particularly in wastage, and called for tighter expenditure controls and greater allocation of resources to growth-enhancing activities. While economists broadly accept the need for further fiscal adjustment, Leader of Opposition in Parliament Simplex Chithyola-Banda questioned whether Malawi should pursue a new Extended Credit Facility (ECF) under what he described as difficult conditions.
Chithyola-Banda advocated for increased agricultural production and investment in mining, including quantifying the country's mineral deposits to attract investment. He suggested that focus on home-grown economic solutions could help address problems and that putting much attention on productive areas should be a viable option. The IMF and Ministry of Finance, Economic Planning and Decentralisation were yet to respond to questions on the claims by press time.
Malawi's previous $175 million ECF, approved in November 2023, expired in May 2025 without completion of a programme review after only an initial disbursement. The government stated that the programme was terminated by "mutual agreement", but economists have suggested that deeper governance challenges may have contributed to the collapse. The recent IMF team met with senior government officials, including Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamvekha and RBM Governor George Partridge.
Key points
- Economists warn that IMF's call for fiscal and monetary tightening may undermine investment and recovery in Malawi
- Malawi's previous $175 million ECF expired in May 2025 without completion of a programme review
- Economists suggest that the government should target inefficient and non-essential spending and strengthen revenue mobilisation rather than cutting productive investment and essential social services
