Malawi’s economic recovery remains fragile due to lagging implementation of macroeconomic reforms and a series of exogenous shocks impacting the country according to the latest World Bank Malawi Economic Monitor (MEM).
The report, released on Friday, said sustained economic instability is also hindering Malawi from taking advantage of its significant potential to achieve higher rates of growth. and support sustainable development.
The MEM provides a semi-annual analysis of Malawi’s economic and structural development issues.
This 20th edition, entitled ‘The Rising Cost of Inaction’, noted that after a series of bold reform measures in 2023, supported by an IMF Extended Credit Facility (ECF) and direct budget support from development partners, momentum towards addressing the country’s underlying fiscal and external deficits dissipated these structural imbalances were further compounded by continued overspending and debt accumulation resulting in greater macroeconomic instability and limiting the space for productive investment.
“Without pro-active policy reforms, rising domestic debt levels, external debt vulnerabilities, exchange rate instability, low foreign exchange accumulation, and high inflation will likely persist. Debt service payments and other statutory expenditures will also continue to crowd out private sector investment. Persistent delays in moving ahead with urgent economic reforms reforms only increases the magnitude of the eventual macro-fiscal adjustment and heightens the risk of further deterioration.
“Macroeconomic stability is a foundational pre-condition for Malawi’s economic recovery and longer-term prosperity. Stabilizing public finances, building up foreign exchange reserves, and achieving debt sustainability will create the necessary conditions for attracting private investment and enabling the success of the government’s Agriculture, Tourism, and Mining (ATM) Strategy. Without undertaking serious reform actions now, the pain of the e eventual economic adjustment and the risks of further destabilization will only continue to grow,” said Firas Raad, World Bank Country Manager for Malawi.
The MEM’s special topic, focuses on Malawi’s mining sector, outlining how the country’s wealth of energy transition minerals (ETM) carries enormous potential for accelerating broad-based economic growth over the coming decades.
With a significant global shift towards renewable energy, there has been a recent global surge in demand for ‘green minerals-such as graphite, titanium, and rare earth elements-all of which are abundantly available in Malawi. To capitalize on this strategic opportunity, the MEM recommends that the Government of Malawi moves expeditiously to strengthen the legal, regulatory and institutional framework of the mining sector, as well as its human resource capacity..
“Between 2026 and 2040. the mining ng sector could generate a total of $30 billion in exports. with annual exports reaching $3 billion by 2034, and remain broadly stable over the life of mines. These of mines. These revenues, if realized, can expand fiscal space, generate significant foreign exchange, ease debt challenges, and catalyze accelerated economic and social progress. These large expectations, however, for reaping economic benefits from mining, often clash with the challenges of the current realities, leading to frustration and disillusionment among the public.
“Key reforms, therefore, focused on implementing the grow, protect, and benefit approach, are required and should be taken forward vigorously over the coming period,” said Robert Schlotterer, Practice Manager of the World Bank’s Energy and Extractives Global Practice.
As part of this national effort, the MEM recommended the implementation of a three-pronged approach namely; adopting well-informed policies to enable the sustained growth of the mining sector, boosting the govemments institutional capacity, including the Malawian Environmental Protection Authority (MEPA), to ensure effective social and environmental protection; and ensuring there is an efficient, effective, and transparent system to manage mining revenues for the benefit and economic welfare of the Malawian people.
