The Internat i o na l Monetary Fund (IMF) says without policy measures to support all factors of production, low income countries (LICs) will not be able to generate the levels of growth needed to improve durably the standard of living for their fast-growing populations.
In its April 2025 policy paper titled ‘Macroeconomic Developments and Prospects in Low-Income Countries’, IMF said the policy and reform agenda for LICs, including Malawi, should be carefully calibrated to country-specific conditions and focus on enhancing spending efficiency and prioritisation, mobilising domestic revenue and strengthening economic institutions.
Reads the policy paper in part: “The first priority involves implementing the necessary fiscal consolidations with as little negative impact on growth and vulnerable households as possible. Moreover, the mobilisation of growth enhancing external financial inflows and domestic financial market development can support consumption and investment.
“The second priority is to improve LICs’ growth potential by increasing productivity, and especially total factor productivity [TFP], which has contributed negatively to growth in recent years.”
IMF said looking ahead,
downside risks are significant, reflecting a subdued global economic outlook and elevated uncer tainty from recent announcements on trade policies and aid flows, as well as tighter global financial conditions.
According to the paper, LICs’ gross domestic product 2024 weighted average growth turned out at 4.4 percent, unchanged from 2023, and one point below the average growth experienced over the 2010s.
During the year, 11 of the 20 fastest growing countries in the world were LICs.
By contrast, growth remained very low, virtually no progress on per capita incomes in many of the poorest LICs, including Malawi.
IMF published data shows that the GDP per capita income has dropped over the past four years to $463.73 (about K810 713) in 2024 from a peak of $580.92 (about K1 million) in 2021.
Economists say a higher GDP per capita is generally associated with a higher standard of living.
In recent years, the country registered a growth of 1.9 and 1.8 percent in 2023 and 2024 respectively, due to cyclones such as Freddy, and El-Nino weather-related conditions, which reduced agricultural production.
According to the data, economic growth has averaged 2.2 percent, far below the recommended 10.6 percent required to grow the economy
to a lower-middle-income status by 2030, with a GDP per capita mark of about $1 086 (about K1.9 million) as envisaged in Malawi 2063 (MW2063), the country’s long-term development strategy.
Minister of Finance and Economic Affairs Simplex Chithyola-Banda conceded in the 2025/26 Budget Statement that since the current administration assumed office in 2020, it has been navigating through various economic turbulences.
“As such, the economic landscape has not evolved as anticipated, with persistent pressures on key indicators such as economic growth, exchange rates, inflation and structural shifts in trade and production,” he said.
