2017 Index of Economic Freedom

Malawi

overall score52.2
world rank149
Rule of Law

Property Rights36.0

Government Integrity31.3

Judicial Effectiveness44.2

Government Size

Government Spending69.8

Tax Burden79.1

Fiscal Health33.5

Regulatory Efficiency

Business Freedom45.3

Labor Freedom56.9

Monetary Freedom54.7

Open Markets

Trade Freedom70.5

Investment Freedom55.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 18.1 million
  • GDP (PPP):
    • $20.4 billion
    • 3.0% growth
    • 4.1% 5-year compound annual growth
    • $1,124 per capita
  • Unemployment:
    • 6.7%
  • Inflation (CPI):
    • 21.9%
  • FDI Inflow:
    • $142.5 million
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In June 2016, the International Monetary Fund announced that it will extend its loan program for Malawi, including an extra $76.8 million to help the country battle hunger brought on by one of the worst droughts in southern Africa’s history, for a further six months. Malawi’s economy depends on its agriculture sector, which is often subject to adverse weather conditions.

The government has run large fiscal deficits in recent years, and the costs of debt service are rising. Corruption is endemic in several areas of the government and a deterrent to foreign investment. The judicial system is independent, but it is also slow and inefficient.

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Background

Malawi achieved independence from the British in 1964 and was ruled as a one-party state by Dr. Hastings Kamuzu Banda for 30 years. President Bingu wa Mutharika, elected in 2004 and reelected in 2009, died in April 2012 and was replaced by Vice President Joyce Banda. In May 2014, Peter Mutharika, brother of the late president, won the presidency in elections of questionable legitimacy. Malawi is one of Africa’s most densely populated countries. More than half of the population lives below the poverty line, and over 85 percent depend on subsistence agriculture. Tobacco, tea, and sugar are the most important exports.

Rule of LawView Methodology

Property Rights 36.0 Create a Graph using this measurement

Government Integrity 31.3 Create a Graph using this measurement

Judicial Effectiveness 44.2 Create a Graph using this measurement

Despite efforts to improve the land tenure system, customary rules still prevail, and occupants hold no legally binding titles. More than half of the arable land is untitled. The judicial system is independent but inefficient. Serious weaknesses include poor record keeping; a shortage of judges, attorneys, and other trained personnel; heavy caseloads; and a lack of resources. There have been recent allegations of rampant state corruption.

Government SizeView Methodology

The top individual income and corporate tax rates are 30 percent. Other taxes include a value-added tax and an inheritance tax. The overall tax burden equals 16.9 percent of total domestic income. Government spending has amounted to 31.7 percent of total output (GDP) over the past three years, and budget deficits have averaged 5.7 percent of GDP. Public debt is equivalent to 83.4 percent of GDP.

Regulatory EfficiencyView Methodology

Malawi has taken steps to improve its regulatory framework, but progress has been slow. Although the public sector is a large employer, most of the population remains employed outside of the formal sector, primarily in agriculture. The government outlined plans to reduce farm subsidies in fiscal year 2015–2016, but because of heavy political resistance to reform, those plans have failed to materialize.

Open MarketsView Methodology

Trade is important to Malawi’s economy; the value of exports and imports taken together equals 62 percent of GDP. The average applied tariff rate is 4.8 percent. Foreign ownership of land is restricted, and state-owned enterprises distort the economy. Malawi’s developing financial sector remains dominated by banking, but expensive credit and the lack of equitable access to finance continue to hinder private-sector development.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Mauritius74.70.0
2Botswana70.1-1.0
3Rwanda67.64.5
4Côte d'Ivoire 633.0
5Namibia62.50.6
6South Africa62.30.4
7Seychelles61.8-0.4
8Swaziland61.11.4
9Uganda60.91.6
10Burkina Faso59.60.5
11Benin59.2-0.1
12Mali58.62.1
13Gabon58.6-0.4
14Tanzania58.60.1
15Madagascar57.4-3.7
16Nigeria57.1-0.4
17Cabo Verde56.9-9.6
18Democratic Republic of Congo56.410.0
19Ghana56.2-6.8
20Guinea-Bissau56.14.3
21Senegal55.9-2.2
22Comoros55.83.4
23Zambia55.8-3.0
24São Tomé and Príncipe 55.4-1.3
25Mauritania54.4-0.4
26Lesotho53.93.3
27Kenya53.5-4.0
28The Gambia53.4-3.7
29Togo53.2-0.4
30Burundi53.2-0.7
31Ethiopia52.71.2
32Sierra Leone52.60.3
33Malawi52.20.4
34Cameroon51.8-2.4
35Central African Republic51.86.6
36Niger50.8-3.5
37Mozambique 49.9-3.3
38Liberia49.1-3.1
39Chad492.7
40Sudan48.8N/A
41Angola48.5-0.4
42Guinea47.6-5.7
43Djibouti46.7-9.3
44Equatorial Guinea451.3
45Zimbabwe445.8
46Eritrea42.2-0.5
47Republic of Congo 40-2.8
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