Malawi - Joint World Bank-IMF Debt Sustainability Analysis

Overview & Synopsis

Malawi’s external and overall public debt is assessed as “in distress,” unchanged from the previous Debt Sustainability Analysis (DSA) published in November 2023. This DSA presents an analysis of Malawi’s debt outlook prior to the authorities’ planned external debt restructuring, the negotiations of which are ongoing, but where progress has been limited to official bilateral creditors only. Under the baseline scenario, the Present Value (PV) of PPG external debt-to-GDP remains below the risk threshold throughout the forecast horizon. However, breaches are observed in the PV of debt-to-exports, debt service-to-revenue, and debt service-to-exports ratios—with the latter remaining in breach through the medium term. The PV of Malawi’s overall public debt-to-GDP was around 79 percent in 2024 and remains significantly above the threshold through and beyond the medium term. Malawi’s debt is currently unsustainable. Ensuring overall public debt sustainability will require bringing public debt firmly on a downward trajectory through a medium-term macroeconomic adjustment, growth-supporting reforms, and addressing the high domestic interest bill. The implementation of the authorities’ debt restructuring strategy would be necessary for the external debt burden to be considered sustainable on a forward-looking basis.