Malawi’s Debt Crisis Deepens As Aid Cuts Hurt

Behind a dimly lit bar in Malawi’s capital, Ben Manda rubbed his drained eyes and poured a buyer a drink. He had been working for 36 hours straight, packing in back-to-back shifts to feed his household of 4.

“I have never been house in three days,” stated the 32-year-old barman in a run-down membership in Mtandire, one in every of Lilongwe’s largest and most crowded casual settlements. “Occasions are powerful.”

Manda is a casualty of Malawi’s financial struggles, his livelihood hanging by a thread as international support cuts and mounting nationwide debt tighten their grip on his destitute African nation.

A small tv above the bar flickered with information stories of funds shortfalls, unpaid salaries, and a spiralling price of dwelling.

“The issue is that our leaders divert the cash from its meant use,” Manda stated, accusing the political management of misusing international support.

The nation of 21 million folks — greater than two-thirds of whom dwell in excessive poverty, in line with the World Financial institution — has for many years been depending on international support.

The scaling again of funding from Washington’s USAID company this 12 months in addition to cuts by Britain and different donors has fed a storm of crises inflicting financial instability that’s worsening forward of basic elections in September.

“Since 2013, the nation has misplaced an estimated 5 % of its GDP, or roughly $545 million yearly, as a consequence of decreased donor help,” Agness Nyirongo, financial governance officer for the Centre for Social Concern, a non-government organisation, informed AFP.

“The help withdrawal means the nation has to prioritise the little income regionally generated to repay loans on the expense of service supply,” stated Willy Kambwandira of the Centre for Social Accountability and Transparency.

Malawi is one in every of six international locations with unsustainable debt ranges, in line with the Worldwide Financial Fund’s (IMF) February 2025 listing.

Public sector debt rose from 48 to 93 % of GDP between March 2020 and March 2024, in line with authorities figures cited in an IMF report this month.

“Fiscal pressures which have contributed to this rise embrace spending to fight the Covid-19 pandemic and the aftereffects of three cyclones, excessive inflation, and rising international alternate charges,” it stated.

Structural weaknesses and monetary mismanagement have contributed to Malawi’s financial woes, stated college lecturer Bertha Chikadza, president of the Economics Affiliation of Malawi.

For instance, tobacco dominates exports, making up 60 %, and worth slumps for the crop have reduce international alternate earnings.

“With little or no diversification in export earnings, the nation has had persistent commerce deficits,” she stated.

Debt servicing consumes about half of home income, leaving little for well being, training and different crucial sectors, Chikadza stated.

With inflation of 28.5 % this 12 months pushing up costs, Malawians have taken to the streets in protest in a number of cities.

Authorities coping measures, together with reducing public spending and elevating taxes, have been deeply unpopular.

President Lazarus Chakwera, standing for re-election in September, repeated on the UN Basic Meeting final 12 months pleas for debt reduction to present his nation — and African nations in an identical plight — some “respiration house”.

The subject is a precedence this 12 months for the G20 group of main economies beneath the presidency of South Africa, the primary African nation to carry the position.

Greater than half of Africa’s 1.3 billion folks dwell in international locations that spend extra on curiosity funds than on social points corresponding to well being, training and infrastructure, in line with the South African authorities.

The answer is to not write off debt, stated David McNair, international coverage government director on the One Marketing campaign non-profit group.

Growing international locations corresponding to Malawi “want extra borrowing to permit them to speculate, notably due to the demographic tendencies,” he stated.

Nevertheless, their debt is “too costly,” he stated, calling for the G20 to place in place a overview of scores businesses’ assessments of debt threat and discover methods to unlock lower-cost personal capital.