2014 Index of Economic Freedom

Malawi

overall score55.4
world rank124
Rule of Law

Property Rights45.0

Freedom From Corruption31.9

Limited Government

Government Spending63.0

Fiscal Freedom78.0

Regulatory Efficiency

Business Freedom38.9

Labor Freedom60.3

Monetary Freedom64.1

Open Markets

Trade Freedom72.7

Investment Freedom50.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 16.6 million
  • GDP (PPP):
    • $14.3 billion
    • 1.9% growth
    • 6.0% 5-year compound annual growth
    • $858 per capita
  • Unemployment:
  • Inflation (CPI):
    • 21.3%
  • FDI Inflow:
    • $129.5 million
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Malawi’s economic freedom score is 55.4, making its economy the 124th freest in the 2014 Index. Its score is essentially unchanged from last year, with improvements in property rights, labor freedom and the control of government spending undermined by a significant loss of monetary stability. Malawi is ranked 22nd out of 46 countries in the Sub-Saharan Africa region, and its overall score is below the world average.

Over the 20-year history of the Index, Malawi’s economic freedom has been largely stagnant. Despite notable score improvements in trade freedom, monetary freedom, and fiscal freedom, its overall gain has been largely offset by a notable decline in business freedom and a smaller decline in property rights.

Malawi’s economy continues to be rated “mostly unfree.” It lags in competitiveness and the promotion of the broad-based economic growth so essential to the reduction of poverty. The poor quality of much of the basic infrastructure and the government’s inefficiency in delivering public goods have been serious impediments to vibrant economic development.

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Background

Malawi achieved independence 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 re-elected in 2009, died in April 2012 and was replaced by Vice President Joyce Banda. Malawi is one of Africa’s most densely populated countries. Over 85 percent of the population depends on subsistence agriculture, and the agricultural sector accounts for over 35 percent of GDP and over 80 percent of exports. Tobacco, tea, and sugar are the most important exports. Foreign donors, who provided an average of 36 percent of government revenue since 2006, suspended general budget support for Malawi in 2011. In a bid to have donor funding restored, Banda has reversed several of her predecessor’s anti-market economic policies.

Rule of LawView Methodology

Property Rights 45.0 Create a Graph using this measurement

Freedom From Corruption 31.9 Create a Graph using this measurement

Although the constitution provides for the separation of powers among the judicial, executive, and legislative branches of government, the effectiveness of checks and balances has varied. President Banda’s administration has been praised for efforts to reduce waste and fight corruption. A law that limited the power of the courts to issue injunctions was repealed, and the head of the national police was replaced.

Limited GovernmentView Methodology

The top individual income and corporate tax rates are 30 percent. Other taxes include a value-added tax (VAT) and a capital gains tax. Overall tax revenue is about 20 percent of the domestic economy. Government expenditures equate to 35 percent of GDP. Public debt reached about 55 percent of the domestic economy in 2013. Public finances have been under stress, and the new government has looked to tighten spending.

Regulatory EfficiencyView Methodology

Commercial regulations have not been implemented or enforced effectively. Economic diversification has lagged, and much private-sector activity takes place outside of the formal economy. Labor regulations, although not fully enforced, are relatively rigid. In 2012, the new government devalued Malawi’s currency to allow a market-determined exchange rate. A new three-year IMF agreement worth $157 million soon followed.

Open MarketsView Methodology

Malawi’s average tariff rate is 6.2 percent. Importing goods is costly and time-consuming. Access to foreign exchange can be difficult at times. The financial sector, dominated by banking, remains underdeveloped, and a full range of modern financing tools is not readily available. Capital transactions and foreign exchange accounts are also limited.

Country's Score Over Time

Bar Graph of Malawi Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Malawi to other economic country groups

Regional Ranking

rank country overall change
1Mauritius76.5-0.4
2Botswana721.4
3Cape Verde66.12.4
4Rwanda64.70.6
5Ghana64.22.9
6South Africa62.50.7
7Madagascar61.7-0.3
8Swaziland61.24.0
9Zambia60.41.7
10Uganda59.9-1.2
11The Gambia59.50.7
12Namibia59.4-0.9
13Burkina Faso58.9-1.0
14Gabon57.80.0
15Tanzania57.8-0.1
16Côte d'Ivoire 57.73.6
17Kenya57.11.2
18Benin57.1-0.5
19Seychelles56.21.3
20Djibouti55.92.0
21Mali55.5-0.9
22Malawi55.40.1
23Senegal55.4-0.1
24Niger55.11.2
25Mozambique 550.0
26Nigeria54.3-0.8
27Guinea53.52.3
28Mauritania53.20.9
29Cameroon52.60.3
30Liberia52.43.1
31Burundi51.42.4
32Comoros51.43.9
33Guinea-Bissau51.30.2
34Sierra Leone50.52.2
35Ethiopia500.6
36Togo49.91.1
37Lesotho49.51.6
38São Tomé and Príncipe 48.80.8
39Angola47.70.4
40Central African Republic46.7-3.7
41Chad44.5-0.7
42Equatorial Guinea44.42.1
43Republic of Congo 43.70.2
44Democratic Republic of Congo40.61.0
45Eritrea38.52.2
46Zimbabwe35.56.9
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