By CIJM

Malawi stands at a critical crossroads, grappling with severe economic challenges that threaten its stability. Persistent fiscal deficits, soaring debt, and chronic food insecurity are compounded by the adverse effects of climate change.

The World Bank’s latest Malawi Economic Monitor (MEM) reveals a stark reality: despite its vast untapped mineral resources, the nation struggles to achieve economic resilience.

This report delves into Malawi’s economic crisis, the overlooked opportunities within its mining sector, and the immediate reforms necessary to avert further decline.

Malawi’s economic landscape is increasingly precarious. The MEM forecasts a dismal 1.8% GDP growth for 2024, marking the third consecutive year of declining per capita income. A drought induced by El Niño has decimated agricultural output, with maize production plummeting to just 2.7 million metric tons—far below the 33-35 million metric tons required for domestic consumption.

As a result, approximately 5.7 million people—28% of the population—are projected to face crisis-level food insecurity between October 2024 and March 2025. The country’s heavy reliance on rain-fed agriculture leaves it vulnerable to climatic shocks.

The fiscal situation is equally alarming. Government revenue collection is currently 22.3% below mid-year targets, yet projections for the full year have been revised upward—a move that many economists view as overly optimistic.

The MEM highlights escalating fiscal risks stemming from quasi-fiscal activities such as fuel and fertilizer subsidies, which have led to significant arrears—over US$70 million owed by the National Oil Company of Malawi (NOCMA) to fuel suppliers.

The government’s reluctance to adopt cost-reflective pricing exacerbates foreign exchange shortages, with discrepancies between official and parallel market exchange rates exceeding 50%.

In the midst of these economic challenges lies Malawi’s substantial mineral wealth, largely untapped. The MEM identifies the country as a potential hub for energy-transition minerals (ETMs) like graphite, titanium, uranium, and rare earth elements—key components in the global shift towards renewable energy.

However, mining currently contributes a mere 0.7% to GDP.

The MEM outlines eight promising mining projects—including the Kayelekera uranium mine and Kasiya rutile project—that could generate up to US$43 billion in export earnings from 2025 to 2040 if properly developed. Yet progress is hindered by delays in finalizing Mining Development Agreements (MDAs) and issuing permits.

The ongoing economic crisis severely impacts ordinary Malawians. Inflation remains stubbornly high, driven by rising costs for food, housing, and utilities; November 2024 saw headline inflation reach 27%, eroding purchasing power.

Although the banking sector remains profitable, it faces increasing vulnerability with non-performing loans rising to 9% of total loans—exceeding the regulatory threshold of 5.

The MEM warns that continued inaction will escalate costs for future adjustments. “The longer we wait, the harder recovery will be,” cautions Jakob Engel, lead author of the report. He stresses that urgent reforms are essential for restoring macroeconomic stability and attracting investment.

Malawi’s economic crisis underscores the dire consequences of inaction. While its mineral wealth presents significant potential for recovery and growth, realizing this opportunity demands bold reforms and decisive leadership.

As highlighted in the MEM report: “The cost of inaction is rising; however, transformation is within reach.”

Meanwhile, everyday Malawians continue to suffer under rising prices without corresponding income increases. The pressing question remains: Will Malawi’s leadership rise to meet these challenges or allow further economic decline? The answer will shape the future for millions across the nation.