• The World Bank approved an $80 million grant to support local governance and public service delivery.

• Malawi’s public debt stood at 78.4% of GDP in 2025, limiting fiscal space.

• External vulnerabilities persist, with imports more than three times exports and reserves below one month of cover.

Malawi secured an $80 million grant from the World Bank to strengthen local governance and improve public service delivery, as the country continues to face tight fiscal and external constraints.

The government announced the approval of the financing on April 25. The grant will support all 32 local councils and finance the second phase of the “Governance to Enable Service Delivery” (GESD 2.0) program.

Firas Raad, the World Bank country director for Malawi, said the project would strengthen decentralization and professionalize local administration. Moreover, the program aims to address inefficiencies in public spending chains, which authorities have identified as a key obstacle to effective service delivery.

Fiscal pressures remain elevated

The grant provides budgetary relief by supporting essential public spending without increasing debt pressure. However, Malawi continues to operate under constrained fiscal conditions.

Public debt reached 78.4% of GDP in 2025, according to the International Monetary Fund, even though it declined from 2024 levels.

In addition, the fiscal deficit narrowed from 9.1% of GDP in 2024 to 8.4% in 2025. However, the deficit continues to drive borrowing needs for social spending and development projects. The African Development Bank expects the deficit to average 12.5% of GDP between 2026 and 2027, signaling sustained fiscal strain.

The World Bank highlighted persistent external vulnerabilities. Imports exceed exports by more than three times, reflecting a narrow and undiversified export base. In addition, high trade costs and rising import demand continue to widen the external gap.

Foreign exchange reserves remain critically low, covering less than one month of imports. Total economy-wide reserves cover just over two months. As a result, the country remains highly exposed to external shocks with limited capacity to absorb volatility.

The World Bank also plans a further $100 million under a rapid response initiative. This additional funding aims to help Malawi address economic and social emergencies. However, the institution noted that while the support signals strong donor engagement, it remains limited compared with the country’s structural financing needs.

This article was initially published in French by Carelle Yourann

Adapted in English by Ange J.A de Berry Quenum