UK-based charity Debt Justice says Malawi’s external debt service have reached an average of 20 percent of government revenue pegged at K4 trillion between 2023 and 2025.
Debt Justice, which is part of a global movement to end unjust debt, said this scenario is forcing cuts in spending on essential services such as healthcare and education, the highest in decades.
Across 56 lower-income countries, including Malawi, the average debt payments hit 19.8 percent of government revenue in 2025, an increase of 220 percent since 2010.
In its analysis of debt payments in lower-income countries, Debt Justice warned that vulture funds or investors that buy cheap distressed debt and pursue full repayment for profit, are increasingly targeting highly indebted countries.
Debt Justice executive director Heidi Chow is quoted in the analysis as having said that vulture funds are swooping in on the worst debt crisis in over three decades.
She said: “The UK has the power to stop this predatory behaviour. As it takes on the G20 presidency next year, the UK has the opportunity to demonstrate global leadership by overhauling the G20 debt relief scheme and passing new legislation to ensure private lenders take part in debt relief.”
In the analysis, Debt Justice indicates that high debt payments reduce public spending, including on vital services such as healthcare and education.
Last year, Debt Relief for Green and Inclusive Recovery said Malawi alongside 14 other African economies, had already breached solvency thresholds on their external debt.
This meant that Malawi had reached a stage where its debt duties were no longer manageable in relation to its ability to produce resources for repayment, according to the report.
Scotland-based Malawian economist Velli Nyirongo said in an interview on Friday that the country’s external debt service obligations far exceed its capacity to pay, particularly after years of economic shocks, declining donor support and persistent current account deficits.
“Without a comprehensive and credible restructuring deal, Malawi will find it difficult to restore debt sustainability, regain access to new funding, or stabilise the economy,” he said.
Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamvekha said in the 2026/27 proposed National Budget that Malawi’s path towards managing public debt is constrained by the current stock levels, which stand at K23.9 trillion, which is 90.9 percent of gross domestic product (GDP) as of December 2025.
From the total debt stock, 65 percent is domestic debt, translating to K16 trillion.
“The debt stock remains worrisome and unsustainable, posing heightened risks to macroeconomic stability,” he said.
In the current fiscal year that ends on March 31, Treasury projects public debt interest at K2.7 trillion, an increase of 22.9 percent from the 2025/26 mid-year revised figure of K2.3 trillion, largely due to past committed debt.
On the other hand the 2026/27 fiscal year, interest payments are projected to consume K2.7 trillion, according to the Ministry of Finance, Economic Planning and Decentralisation.
As part of efforts to qualify for the four-year $175 million (about K306 billion) Extended Credit Facility, which automatically terminated on May 15 last year due to lack of reviews for 18 months, International Monetary Fund (IMF) had set addressing unsustainable public debt as one of the prerequisites for its support.
Borrowing by a government is deemed sustainable when it is below 50 percent of GDP, comprising domestic borrowing of not beyond 20 percent of GDP and external borrowing not exceeding 30 percent of the broadest measure of economic activity, according to the IMF.
The joint World Bank/IMF 2025 Debt Sustainability Analysis classified Malawi’s external and overall public debt as “in distress,” consistent with the findings of the previous November 2023 DSA.
The DSA suggests that a primary deficit of about one percent of GDP is required to stabilise public debt and that over the medium-term, the primary balance should reach a surplus of about two percent of GDP to build fiscal buffers, support more development spending, reduce inflation and fill the gap in donor financing.
