It is barely a week after Malawi’s Extended Credit Facility (ECF) with International Monetary Fund (IMF) terminated on May 15. What is not clear to date is the Malawi Government’s end game.
The ECF, secured in November 2023, largely focused on fiscal consolidation, currency devaluation and macroeconomic stabilisation before its automatic termination due to lack of review over an 18-month period.
What next?
In an interview on Saturday, Secretary to the Treasury Betchani Tchereni said the development would now give Malawi flexibility to stimulate the economy.
However, some economists have countered that Malawi’s fragile fiscal position and narrow productive base could make the new direction a hard slog.
A strategic pivot
Tchereni said that the ECF exit was a deliberate move to shift from austerity to growth-oriented policies.
“The ECF focused on stabilisation when Malawians needed jobs, food and medicine,” he said. “Now that it has lapsed, we can explore an expansionary stance focused on industrialisation, mega farming, and mining.”
Tchereni referred to the 2024/25 National Budget as evidence of the new policy pivot.
The fiscal plan that rolled into action on April 1 allocated K100 billion to irrigation development and K150 billion in farm input loans for medium-scale farmers. Tchereni said the initiatives are targeting fiscal expansion.
“The IMF was limiting where and how we could borrow. Now we can source financing where it is available and invest in sectors that can grow the economy,” he said.
Tchereni also dismissed concerns about mounting debt, arguing that “borrowing for infrastructure or productive investments is good debt. Borrowing for consumption is what we must avoid”.
However, from a social justice perspective, some economists have argued that the IMF’s technocratic approach failed to protect the most vulnerable.
Economic justice advocate Fredrick Changaya said while the IMF’s emphasis on discipline is critical, its measures often worsened inequality.
“Many low-income Malawians were worse off under the ECF. Nutrition, health and education suffered—yet these are areas where inequality hits hardest,” he said.
Changaya, who chairs the National Working Group on Trade and Policy, urged government to use the transition period to realign fiscal policy with inclusive development.
His suggested progressive taxation targeting high-income earners and extractive multinationals, strengthening mineral royalties and local ownership structures as well as consolidating fragmented social protection systems under a National Protection Compact.
Changaya also advocates for accrual-based fiscal accounting and the creation of a Public Investment Authority to prioritise infrastructure projects based on long-term returns.
“This is not a time to collapse, it is a time for renewal,” he said. “Development is about people, not numbers.”
In a separate interview, Greenson Nyirenda, an economist at the Catholic University of Malawi, warned that the country’s debt-to-GDP (gross domestic product) ratio, currently at 86.4 percent, leaves little room to manoeuvre.
“Stimulus would necessitate additional borrowing. But how much more can we afford, given that we are already in a debt trap?” he asked.
The 2024/25 fiscal deficit is projected at 13.34 percent of GDP, with nearly half of domestic revenue going towards interest payments.
Imports remain high—at K5.39 trillion in 2024, equivalent to 28.76 percent of GDP—raising fears that any stimulus could leak into foreign economies.
Scotland-based Malawian economist Velli Nyirongo echoed Nyirenda’s concerns, citing poor expenditure controls and overextended subsidies.
Looking ahead
Minister of Finance and Economic Affairs Simplex Chithyola-Banda said Malawi may revisit IMF negotiations after the 2025 general election under terms more aligned with national development priorities.
In the meantime, government insists that fiscal discipline will not be abandoned.
However, with inflation still elevated, foreign exchange shortages unresolved and business confidence fragile, the path forward remains uncertain.
To this, Nyirenda said: “The question isn’t whether to stimulate. If we cannot manufacture, export or finance locally, then stimulus risks becoming another costly detour.”
The ball is in government’s court to balance balance boldness with caution in the absence of IMF guidance on economic management.
