IMF deal hangs in the balance as experts warn Malawi: ‘Fix the economy first’

As Malawi prepares for crucial talks with the International Monetary Fund (IMF) next week, economists have issued a stark warning: securing another bailout package will mean little if the country fails to address the policy failures, fiscal indiscipline and economic mismanagement that derailed previous agreements.

The warning comes ahead of a high-stakes IMF mission scheduled to visit Malawi from June 9 to 18 to discuss a possible new Extended Credit Facility (ECF), a programme that could unlock desperately needed financial support and restore confidence in an economy battling soaring inflation, crippling foreign exchange shortages and a ballooning debt burden.

But experts say Malawi risks repeating a costly cycle of securing agreements only to fail on implementation.

At the centre of the debate is a sobering reality: the country’s last four-year IMF programme worth $175 million (about K306 billion) expired in May 2025 without completing a review, raising serious questions about Malawi’s ability to honour reform commitments.

Former Reserve Bank of Malawi governor and UTM president Dalitso Kabambe says the country should stop treating IMF programmes as political trophies and start focusing on real economic transformation.

“Malawi has repeatedly struggled with policy consistency, fiscal discipline and implementation of agreed reforms,” Kabambe said.

He warned that signing a fresh deal would not automatically solve the country’s economic problems.

“The IMF can support reform, but it cannot substitute leadership, discipline, competence and execution. What Malawi needs now is not another cycle of promises, but credible delivery, restored confidence and a serious long-term strategy for economic transformation,” he said.

Kabambe’s remarks expose a growing concern among economists that Malawi’s economic crisis is no longer simply a funding problem but a governance and implementation problem.

The numbers paint a troubling picture.

Public debt has surged to K23.9 trillion, representing 90.9 percent of the country’s Gross Domestic Product (GDP). Inflation remains stubbornly high at over 30 percent, while foreign exchange shortages continue to choke businesses and drive up the cost of imports.

Meanwhile, fiscal pressures are mounting, with the IMF previously flagging a fiscal deficit exceeding 10 percent of GDP and warning about unsustainable debt levels.

Public finance expert Dalitso Kubalasa believes Malawi must enter the negotiations with a completely different mindset.

He argued that previous reforms were often treated as conditions to satisfy donors rather than commitments to improve the lives of Malawians.

“This time, we must do business unusual,” Kubalasa said.

He identified three make-or-break issues: strict fiscal discipline, realistic exchange rate management and stronger social protection programmes to shield vulnerable citizens from the pain of economic reforms.

According to Kubalasa, government must build consensus with Parliament, the private sector and civil society before the IMF delegation arrives, rather than negotiating reforms behind closed doors and expecting public support afterwards.

The pressure is also mounting from economic justice advocates.

Malawi Economic Justice Network Executive Director Bertha Phiri says government can no longer rely on promises and policy statements alone.

“The IMF would want to see results, not plans,” she said.

Phiri argued that authorities must demonstrate tangible progress in narrowing the budget deficit, improving revenue collection, controlling expenditure and stopping the accumulation of arrears.

She also called for greater transparency in public finances, including fuel levy collections, procurement processes and asset declarations by public officials.

“The June meetings are a chance to reset,” she said.

Her comments underscore the challenge facing government as it seeks to convince both the IMF and ordinary Malawians that reforms are being taken seriously.

For Finance Minister Joseph Mwanamvekha, however, the mission represents an opportunity to strike what he calls a “win-win” agreement.

He insists government will pursue reforms that support economic recovery without imposing unbearable hardship on struggling households.

“We will not accept any reforms that will harm the very people we want to protect,” Mwanamvekha said.

Yet the path to a new agreement remains far from guaranteed.

The IMF has repeatedly emphasised that progress on exchange-rate reforms, debt sustainability and fiscal management will be critical in determining whether a new programme can move forward.

Those issues have historically been among Malawi’s most difficult reform areas.

As IMF officials prepare to land in Lilongwe, the stakes could hardly be higher.

A successful agreement could unlock fresh international support, improve investor confidence and provide a roadmap towards economic recovery.

Failure, however, could deepen the country’s economic isolation, worsen forex shortages, fuel inflation and leave millions of Malawians facing even tougher living conditions.

The coming negotiations are therefore about far more than securing another IMF facility. They represent a crucial test of whether Malawi has finally learned the lessons of past failures—or whether it is once again preparing to enter a new agreement without fixing the problems that caused the last one to collapse.

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