Debt Crisis Forces Malawi to Depend on Grants
Malawi is increasingly depending on grants instead of loans from international lenders because of the country’s growing debt crisis and weakening economy, the African Development Bank (AfDB) has said.
According to the AfDB, Malawi’s economic situation has worsened so much that the country can no longer easily access development loans and is now mainly receiving grants.
In its latest assessment report, the AfDB said Malawi has moved from being a country that qualified for both loans and grants to becoming a “grant-only” country under the African Development Fund (ADF).
The bank said Malawi’s problems include rising public debt, shortage of foreign exchange, a weakening kwacha, and poor economic performance.
The International Monetary Fund (IMF) has already classified Malawi as a country in “debt distress,” meaning the country is struggling to manage and repay its debts.
The AfDB warned that these economic challenges are affecting Malawi’s ability to qualify for more development financing.
Economic experts say the situation could slow down important development projects in the country.
Public finance expert Dalitso Kubalasa said reduced donor funding means many projects linked to climate change, transport systems, agriculture, and water management may fail to move forward.
“With Malawi depending heavily on donors, the country is becoming more vulnerable. Many important projects are now at risk,” Kubalasa said.
Scotland-based Malawian economist Velli Nyirongo also warned that reduced development funding could hurt economic growth and poverty reduction efforts.
He said projects such as roads, transport corridors, and regional trade programmes are important because they help lower business costs, improve trade, and attract investment.
“If funding reduces, Malawi may struggle to achieve its long-term development goals,” Nyirongo said.
Economist and presidential aspirant Milward Tobias said donor funding is also important because it brings much-needed foreign exchange into the country.
He expressed concern that some funding reductions are linked to weak accountability and poor management of donor-supported projects.
The Ministry of Finance earlier admitted that there are inefficiencies in the management of donor funds.
Government figures show that Malawi’s total public debt had reached K23.9 trillion by December 2025. This is about 90 percent of the country’s entire economy.
Out of this debt, K16 trillion is domestic debt borrowed within Malawi.
The government is also expected to spend about K2.7 trillion on interest payments alone during the current financial year.
The African Development Bank has supported Malawi for many years and has financed 149 projects worth about $1.89 billion (around K3.3 trillion).
As of March 2025, the bank had 11 active projects in Malawi worth about $234 million (around K409 billion).
Experts warn that unless Malawi improves economic management, controls borrowing, and strengthens accountability, the country could continue facing financial pressure and increasing dependence on donor grants.
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