The Economics Association of Malawi (Ecama) says Malawi could face heightened economic risk in the face of a sharp slowdown in global growth.
The warning comes after the International Monetary Fund (IMF) this month projected global growth to decelerate to 2.8 percent in 2025, down from 3.3 percent in January, citing aggressive United States tariffs and retaliatory trade measures as key drivers.
Growth in emerging markets and developing economies is expected to fall to 3.7 percent while global inflation is forecast at 4.3 percent.
In an interview, Ecama president Bertha Bangara-Chikadza, who also teaches economics at the University of Malawi, warned that weaker global demand could depress the country’s export revenues, with ripple effects across foreign exchange reserves, job markets and public finances.
She said: “Reduced export earnings mean less revenue for the country, which may force the government to increase borrowing both domestically and externally.
“High debt levels will crowd out the private sector and raise interest rates, worsening the slowdown.”
Malawi’s economy is already constrained by high debt service obligations, inflationary pressures and limited fiscal space.
In the 2025/26 fiscal year, Malawi is expected to spend nearly 40 percent of its domestic revenues on servicing debt, leaving little room for development spending.
Adding to the pressures, Bangara-Chikadza said diaspora remittances, a critical source of foreign currency for Malawi, could decline if job losses mount in advanced economies facing slower growth.
She also warned that declining aid inflows could undermine fiscal sustainability, forcing the government to either cut spending or borrow more.
“With reduced aid, there could be cuts to essential services, including health and education. Alternatively, if government chooses to borrow, it would only deepen the country’s debt burden,” she said.
To navigate the looming challenges, Ecama is recommending urgent fiscal reforms including broadening the tax base by integrating the informal sector into the revenue system, reallocating government spending towards growth-enhancing sectors, and strengthening public financial management.
In the 2025 Regional Economic Outlook for Sub-Saharan Africa released on Friday, the fund urged countries like Malawi to refrain from accumulating arrears to avoid compromising economic stability, particularly during times of shocks.
“These cannot only increase the cost of public service delivery and reduce the credibility of fiscal policy, they can also act as an unpredictable tax on affected suppliers, adding to uncertainty and undermining private-sector development,” the report reads.
