M alawi Government is at high risk of a new debt default as talks to restructure external commercial debt progress slowly, a global credit insurance firm Coface has said.
In its risk analysis for Malawi, the French firm, which offers credit insurance, debt collection and business information worldwide, said domestic debt, which accounts for about 60 percent of total public debt, is growing as government increasingly turns to the domestic market after defaulting on external commercial creditors.
Reads the analysis in part: “The burden of Malawi’s very large public debt is expected to continue increasing in 2026 and beyond.
“Malawi has defaulted on its external commercial creditors, primarily the Trade and Development Bank [TDB] and the African Export-Import Bank [Afreximbank].”
The firm, founded in 1947, said as a result of this, Malawi is turning to the domestic banking market to borrow despite high rates of around six percent real yield on average at three-year maturity, or from the Reserve Bank of Malawi, which holds 30 percent of domestic debt.
The firm observed that following its partial restructuring in 2024 through agreements with China and Kuwait, the amount of bilateral debt is now low, at eight percent of external debt and is primarily owed to China Exim Bank.
In its analysis, Bank of Scotland observed that while bilateral restructuring commitments have been secured and talks with commercial creditors are ongoing, over 60 percent of Malawi’s external debt is multilateral and not subject to restructuring.
In November 2023, the International Monetary Fund (IMF) said Malawi’s efforts to stabilise its economy will count for nothing unless the country secures debt forgiveness on $976 million (about K1.7 trillion) owed to commercial and bilateral creditors.
However, last month, the Reserve Bank of Malawi (RBM) said that about K1.27 trillion owed under facilities with TDB and Egypt-based Afreximbank stood in arrears at the end of 2025 as negotiations to restructure the debt continue, years after the talks were initiated.
United Kingdom-based global affairs think-tank ODI Global noted that Malawi, alongside Zambia and Ghana, was finding it difficult to finalise debt restructuring negotiations with Afreximbank and TDB because the two maintained that their loans should be excluded from restructuring, just like those from the World Bank and African Development Bank.
In an interview yesterday, Scotland-based Malawian economist Velli Nyirongo observed that “such arrears affect the country’s creditworthiness and standing with investors, potentially leading to higher borrowing costs and more limited access to future external financing”.
Ministry of Finance, Economic Planning and Development data show that, as at end-December 2025, Malawi’s total public debt stock stood at K24.33 trillion, up from K19.18 trillion at end-March 2025.
The increase in nominal public debt was accompanied by a rise in the debt-to-gross domestic product (GDP) ratio from 91.5 percent to 93.2 percent over the same period.
Treasury said the increase in total public debt was driven primarily by domestic borrowing, reflecting ongoing fiscal financing requirements and constrained access to concessional external financing.
Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamvekha said in the K11 trillion 2026/27 National Budget Statement that Malawi’s path towards managing public debt is constrained by the current stock levels.
He, however, said the fiscal plan estimates were formulated on the basis that debt restructuring will create fiscal space.
