A renewed call by the International Monetary Fund (IMF) for African countries to tap international capital markets through Eurobonds has reignited debate in Malawi, with analysts divided over the country’s readiness to manage the risks of hard-currency debt.
Stockbrokers Malawi Limited equity investment analyst Kondwani Makwakwa, in an interview on Tuesday, said a carefully structured Eurobond could offer short-term macroeconomic relief.
He said: “A five-year Eurobond priced at nine percent could draw hard-currency inflows and relieve pressure on the kwacha.
“But local investors would want higher yields to match offshore returns, pushing domestic interest rates further up.”
But market analyst Benedicto Bena Nkhoma, who tracks local securities and African sovereign debt, is sceptical about the country’s capacity to sustain such obligations.
He said: “It might look good on paper, but Malawi is not Zambia. Our economy still leans heavily on tobacco.
“With the current challenges around dividend repatriation, it is hard to see how we would sustainably service a Eurobond.”
Their comments follow a July 2025 IMF working paper titled ‘Navigating the evolving landscape of external financing in sub-Saharan Africa’ led by economist Adrian Alter and colleagues.
The study explores how emerging and frontier economies can leverage external private-sector financing, including Eurobonds and syndicated loans to close development financing gaps.
According to the paper, sub-Saharan African countries issued almost $40 billion in Eurobonds between 2020 and 2024, more than double the total raised in the years following the global financial crisis.
While borrowing costs remain high, the so-called “Africa risk premium” averages just 46 basis points and largely disappears in countries with strong institutions and transparent fiscal frameworks.
The IMF argues that countries with stable governance, credible repayment plans and sound fiscal policies can use Eurobonds to diversify funding and extend debt maturities.
However, the report warns that poor timing or weak fundamentals can amplify repayment risks in volatile markets.
In Malawi, the debate is less about the theoretical value of Eurobonds than the country’s capacity to manage them effectively.
Makwakwa argues that if well-timed and transparently administered, Eurobonds could refinance expensive domestic debt and shore up foreign-exchange reserves.
“It’s a tactical tool that works if paired with robust repayment buffers,” he said.
But Makwakwa cautioned that offshore borrowing could distort the domestic bond market.
Reserve Bank of Malawi data show that the central bank holds Treasury bills worth K890.6 billion in 2025.
“It is becoming costlier for small businesses to borrow. Crowding-out is intensifying and liquidity risk is mounting,” said Makwakwa.
Despite these differences, analysts agree that appetite for long-dated kwacha bonds remains weak.
“Investors are nervous about inflation and the upcoming elections. They are staying short-term even when longer bonds promise better returns,” said Makwakwa
But Nkhoma said while commercial banks are still active, international institutions remain cautious.
While the IMF presents a compelling case for frontier markets to access global capital, Malawi’s path forward may hinge less on financial instruments and more on restoring macroeconomic credibility.
