It was never in dispute that Malawi and other smaller economies would be on the receiving end of the global trade war over tariffs sparked by United States President Donald Trump. If anything, it was just a matter of when.
The reality started sinking in end last month when International Monetary Fund (IMF) managing director Kristalina Georgieva , ahead of the IMF-World Bank Spring Meetings underway in Washington DC, cautioned small economies, including Malawi to brace for trade shocks. Talk of when two elephants fight it is the grass that suffers.
She said the global economic shifts triggered by rising tariffs, volatile markets and declining trust in multilateralism are a test of the resilience of fragile economies such as Malawi’s.
Coincidentally, Trade, Industry and Private Sector Development Partners during the week also urged Malawi to embrace effective policies to align private and public sector to achieve a viable socio-economic development.
They cited constraints in tourism such as inadequate supporting infrastructure and services as bottlenecks to success.
So, the worsening tensions largely heightened by the power play between the US and China over tariffs coupled with shrinking aid flows and tightening financial conditions point to a new phase of uncertainty.
In times like these, what makes a difference between survival and collapse is the reaction. Those who see the threats as opportunities and effectively plan to build their capacities and resilience tend to overcome while those that procrastinate in realigning policies lose out.
Malawi, with a public debt K16 billion—almost double the value of the national budget, dwindling foreign exchange reserves at less than three months of import cover and inflation rate at 30.7 percent, is in a precarious situation requiring nothing short of a miracle.
In my entry last Thursday, I quoted African Development Bank (Af DB) president Akinwumi A. Adesina, PhD, as having challenged African countries that in the wake of a rapidly changing global landscape, time has come for the continent to wean itself from aid dependency and chart its future through self–reliance, strategic partnerships and exploiting its vast natural resources.
His sentiments come against a background of the suspension of US Agency for International Development (USAid), general donor fatigue and the trade war. They also resonate with what the IMF chief said this week.
In the K8 trillion 2025/26 National Budget, Minister of Finance and Economic Affairs Simplex Chithyola Banda projected grants at K1.14 trillion with K1.10 trillion coming from international organisations and K86.36 billion from foreign governments.
The situation does not look good for least developed and aid-dependent countries such as Malawi, but I maintain that at the same time, this uncertainty and crisis can be turned into an opportunity towards a journey to economic sovereignty, especially in sectors such as health where our government has all but “abandoned” the health of its citizens by predominantly depending on foreign taxpayers for the drug budget.
It may be argued that this is easier said than done. But if you quantify the public resources drained through ghost workers, corruption, luxury cars for senior public officers and fraud in general, you will appreciate that savings can be made with some level of prudence.
Malawi needs trade more than aid. The World Bank Group describes trade as a golden key towards ending global poverty because countries that are open to international trade tend to grow faster, become innovative, improve productivity and provide higher income as well as more opportunities.
Export growth is critical to attainment of Malawi 2063, the country’s long-term development strategy that envisages diversification of export products within the agricultural sector and towards other sectors , including mining and tourism as having potential to make a difference.
Reaction is everything. At the peak of the Covid-19 pandemic, China viewed the word crisis from two perspectives, one standing for ‘danger’ and another ‘opportunity’. It opted for the ‘opportunity’.
The difference between success and failure lies in identifying the means to tap into that energy that is beneficial both for the individuals and the country.
Economies do not recover through miracles or prayer. They do so by making hard choices and strategies that will later benefit the economy at large. Most of our producers, especially small and medium-scale ones, do not have the capacity, including access to cheaper financing. This is the time to help them build resilience and capacity.
In Malawi, inflation is one key variable used in managing the economy, but truth be told, our inflation is not really about demand as authorities often put it because it is mostly from the supply shocks with almost all strategic commodities, including maize imported.
The time is now to embrace business unusual in practice, not just in theory. I look forward to the day Malawi will find an alternative way to deal with the supply side shocks because that will mark the start of the road to sustained recovery and prosperity.
