Country Summary

Macroeconomic performance and outlook

Real GDP grew an estimated 5.0% in 2019, up from 4.0% in 2018, despite the effects of cyclone Idai. Growth was supported by continued macroeconomic stability and improved agricultural performance (maize output increased 25.7% in 2018/19).

Annual inflation was estimated at 9.0% in 2019 and projected at 8.4% in 2020, down from 21.7% in 2017. The monetary policy rate eased from 20.6% in 2017 to 13.5% by November 2019. The exchange rate stabilized at 738 Malawian kwacha per dollar in September 2019, up from 732 kwacha per dollar in September 2018. For- eign reserves were equal to 3.7 months of imports in June 2019.

Post-cyclone Idai reconstruction created fiscal pres- sures. The government, facing subdued revenue of 19.9% of GDP and growing public debt, sought to reduce domestic debt from 30% of GDP in 2018 to 20% in 2019. The 2019 fiscal spending was reduced from 29.5% of GDP to 25.6%. The 2019 deficit was an estimated 5.9% of GDP, and the 2020 deficit is projected at 4.3%, to be financed from external and domestic resources.

The current account deficit was estimated at 16.9% of GDP in 2019, up from 16.2% of GDP in 2018, driven by a decline in tobacco prices. A current account deterioration is projected at 17.4% of GDP in 2020 and 17.8% of GDP in 2021, driven by post-cyclone Idai infrastructure imports. Unemployment is high at 18.5%, aggravated by a mismatch between the demand and supply for skills.

Tailwinds and headwinds

Malawi’s growth was robust in the first half of 2019, supported by improved agricultural performance. GDP growth prospects for the next few years are positive, due to the rebound in agriculture and improved elec- tricity supply from the Zambia–Malawi interconnector. Growth is projected to rise modestly to 5.2% in 2020 

and 5.5% in 2021, up from 5.0% in 2019, supported by prudent policies, improved external financing, favorable terms of trade, and increased investments in connectiv- ity infrastructure along major trade corridors.

Growth will be reinforced by continuing macroeconomic stability. The cautious monetary easing in June 2019 signaled an attempt to stimulate demand. Maintaining that accommodative policy could propel capital flows, increase economic activity, and restore growth, since it supports credit to the private sector.

The government has proposed to strengthen value addition through the Special Economic Zone (SEZ) Bill to regulate exports through a national export strategy. The bill proposes multiproduct SEZs for oil seeds, sugar cane, beverage manufacturing, and agroprocessing. Malawi will also prioritize exports of tea, legumes, oil seeds, and minerals.

Climate shocks, fiscal policy slippages, and lower business confidence could, however, hurt the economy. Since 2016, fiscal slippages have exacerbated the fiscal deficit, and the debt-to-GDP ratio rose from 30% to 62% between 2013 and 2019.

With public debt rising above the sustainability threshold of 60% of GDP, fiscal space is tight. The plan to reduce the fiscal deficit to 2.5% appears ambitious, as the 2019 cyclone Idai flood recovery costs linger. Risk reduction measures to build resilience to shocks for the 87% of Malawians engaged in agriculture will bolster growth.

Landlocked Malawi’s development relies heavily for external trade on foreign seaports such as Dar es Salaam in Tanzania and Nacala and Beira in Mozambique. Trade is unstable, characterized by laws banning exports, lack of infrastructure, and inadequate diversification and value addition. Tobacco accounts for 50% of exports, vulnerable to price volatility. And the lack of skilled workers makes the labor market dysfunctional, suggesting the need for vocational training and technical education to enhance employability and productivity.

Health sector preparedness

The 2019 Global Health Security Index ranked Malawi at 154 among 195 countries with a score of 28 of 100, rating it least prepared for handling of pandemic outbreaks. Only 10% of households have access to sanitation, hygiene, and hand washing services, essential for COVID–19 prevention. The pandemic response budget of $213.2 million covering January to June 2020 allocated $20 million to strengthen preparedness for handling infectious diseases and to sup- port the post-COVID recovery. Prior to the outbreak, only 9.3% of GDP was devoted to health expenditures, against a target of 15%.

Policy responses

The government adopted a mix of fiscal and monetary policies in response to the pandemic. In the short term, the national response measures include increased health spending to purchase testing equipment and 20 venti- lators, refurbish quarantine centers, build capacity, and recruit 2,000 healthcare workers. It is important that expenditure on health is unaffected by election-related spending to ensure effective implementation of contain- ment measures. In the medium term, livelihoods support, social protection, enhanced support to private sector, and macroeconomic stabilization measures to meet urgent bal- ance of payments gaps and narrowing of fiscal deficit have been prioritized.

The immediate revenue shocks to businesses induced by the COVID-19 pandemic have exposed the companies to liquidity challenges. In response, the Reserve Bank of Malawi eased the liquidity reserve requirement on com- mercial banks to free up an equivalent of $16.3 million for onlending to businesses, coupled with interest rate restruc- turings. Fiscal policy adjustments include tax waivers on personal protective equipment for health workers, soap, and hand sanitizers, waivers of the tourism levy, voluntary tax filings over six months, fuel price cuts by 15%, increased loan allocations to small and medium enterprises, and tax cuts on mobile money and electronic payment services by 40% for all transactions. A more sustainable post-COVID–19 recovery strategy should focus on creating conditions for private sector investment that allow the government to col- lect enough domestic revenues to finance infrastructure development and provide critical social services.

Source: African Economic Outlook 2020

Fixed Income


  • The government securities yield curve extended to 5 years with three real benchmark points along the curve (2-3 and 5 years). 
  • The issuance strategy is to restructure government debt and build the benchmark yield curve for market development. 
  • Malawi  is 28th in the ABMDI 2017 Ranking Report. 

Issuance strategy 

The strategy is to issue more longer-dated government paper in order to restructure government debt, which is largely short term at the moment, and to develop an active benchmark yield curve for market development.   

Benchmark issues 

Malawi aims to develop a market-based longer-dated benchmark government bond yield curve. The government aims to create benchmarks for 2-3-5-7-10-15 and 20 years. The government of Malawi uses the auction method and some issues are reopened until they are fully subscribed and allotted. 

Yield curve

Yield curve calculation models 

Despite the fact that Malawi has no benchmark yield curve, the Reserve Bank of Malawi currently prepares a indicative yield curve on a weekly basis. The actual yields are used where available and indicative yields based on market consensus where there are no active trades. 

Interpolation methods 

The linear interpolation method is used where there are no benchmark yields from actual trades or survey. 

Yield curve managed by 

Despite the fact that Malawi has no benchmark yield curve, the Reserve Bank of Malawi currently prepares a yield curve on a weekly basis. However, this will be transferred to the Financial Market Dealers Association (FIMDA) 

Display platform 

The Daily Reports with the yield curve are posted on the Reserve Bank of Malawi website.   

Challenges in building an efficient yield curve 

Illiquid bonds and limited secondary market: there is usually no secondary market trading of bonds, despite their listing on the Malawi Stock Exchange (MSE). 

Guide to Buying Bonds

Procedures for market participation

Investors can present their bids directly to one of the branches of the Central Bank. Prospectus and application forms for government securities are obtained from the Reserve Bank of Malawi (RBM).

Settlement cycle

Treasury bonds are settled on a T+7 basis.


Interest income in excess of K10,000 is taxable at the appropriate rate according to the Income Tax Act. However, the First Schedule of the Taxation Act exempts holders of government securities to be taxed.

Capital gains on the other hand are taxed at the ordinary income tax rate up to 100% of the gain but there are provisions for inflation adjustment. Capital gains can also be subdivided depending on whether capital allowances were available on the assets. 

Market restrictions

Openness to international investors

Malawi Stock Exchange (MSE) regulations limit participation of an individual foreign portfolio investor to a 10% maximum of any class of security and limit total foreign investment in any portfolio to a maximum of 49%.

Capital controls

Capital accounts were liberalized in the 1990s. This was followed by the FX and the exchange rate liberalization.

Restrictions on foreign exchange and profit repatriation

The foreign exchange market is fully liberalized.

2011, the RBM had to exert greater foreign exchange controls in an attempt to slow depletion of foreign exchange reserves.

There are no restrictions on repatriation of dividends, lease repayments and interest. Capital and loans can be freely remitted as long as they are obtained from foreign sources and registered with the RBM.

Credit rating

Malawi was last rated in 2009 by Fitch. The credit rating agency assigned a rating of B- to the local currency issuer default. S&P and Moody’s have not yet rated Malawi.

List of Primary Dealers 

The Malawi market comprises five primary dealers:

National Bank of Malawi

Standard Bank Malawi

NBS Bank

First Merchant Bank

Trust Securities

The Malawi Stockbrokers Ltd. is the institution authorized by the government to handle the secondary market trading.

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