Embed This Data
- GDP (PPP):
- $20.4 billion
- 3.0% growth
- 4.1% 5-year compound annual growth
- $1,124 per capita
- Inflation (CPI):
- FDI Inflow:
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.
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.
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.
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.
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.
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.