The World Bank says Malawi’s rising debt-service costs are squeezing resources needed for socio-economic development.
The Bretton Woods institution’s group chief statistician Haishan Fu, commenting in the 2026 World Bank International Debt Report, said that private lending to low and middle-income economies has left countries such as Malawi borrowing more, paying more and in many cases leaving less for long-term development.
He said: “The objective should, therefore, not be more debt. It should be better financing that is affordable, transparent, sustainable, and capable of supporting investment and growth.
“Financing that merely enables countries to roll over costly debt cannot substitute for financing that expands productive capacity and raises future incomes.”
The report shows that external debt stock has more than doubled over the past decade, with debt servicing obligations accounting for 11 percent of the country’s export earnings.
The data further show that the country’s external debt stock increased by 8.1 percent from 2024, rising from $1.723 billion (about K3 trillion) recorded in 2015 to $4.048 billion (about K7 trillion) in 2025.
During the review period, public and publicly guaranteed debt accounted for $3.972 billion (about K6.9 trillion) of the total, with multilateral creditors holding $3.599 billion (about K6.3 trillion) while bilateral lenders accounted for $373 million (about K653 million) while external debt was equivalent to 251 percent of exports and 27 percent of gross national income.
In an interview on Monday, Scotland-based Malawian economist Velli Nyirongo said 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.
Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamvekha is quoted as having acknowledged that the high debt burden remains one of the fiscal challenges facing the country’s economy.
On the terms of new borrowing, the World Bank report shows that Malawi’s new commitments from official creditors in 2025 carried an average maturity period of 23 years, a grace period of four years and an average interest rate of 1.1 percent.
However, Malawi had no new commitments from private creditors in 2025.
The debt crisis is taking its toll on Malawi’s public spending. Between 2022 and 2026, Malawi’s real public spending per person, excluding interest payments, is expected to fall by 32 percent and in 2026, it will be over 10 percent lower than it was in 2015, according to ActionAid.
The charity said these cuts are happening in a country in which only 15 percent of children complete secondary school and just under half have access to healthcare.
