World Bank outlines hurdles to debt talks

The World Bank says Malawi’s efforts to restructure its external debt have stalled because the country lacks conditions that have supported successful debt restructuring elsewhere.

In its Africa Economic Update for October 2026, the Bretton Woods institution lists Malawi among African countries facing acute debt vulnerabilities and says restoring debt sustainability remains a pressing challenge.

The report noted that Malawi’s debt composition has complicated efforts to secure comprehensive debt treatment while coordination among creditors, a key requirement in largely voluntary restructuring processes, has been difficult to achieve.

According to the bank, the challenge extends beyond the scale of Malawi’s debt burden to the absence of enabling conditions that have underpinned successful restructuring programmes in other countries.

Reads the report in part: “Malawi, Mozambique, the Republic of Congo and Zimbabwe continue to face acute debt vulnerabilities, underscoring the need for some of these countries to pursue measures to restore debt sustainability.”

The World Bank said that achieving meaningful progress will require stronger creditor coordination and reforms that can help place public debt on a sustainable path.

“Malawi, Mozambique, the Republic of Congo and Zimbabwe continue to face acute debt vulnerabilities, underscoring the need for some of these countries to pursue measures to restore debt sustainability,” reads the report.

It further said that what makes the countries’ situations structurally difficult is not debt severity alone, but the absence of the enabling conditions that have underpinned successful outcomes elsewhere, sustained International Monetary Fund (IMF) programme engagement, a debt structure amenable to comprehensive treatment and a creditor base whose coordination is feasible within a voluntary process.

Minister of Finance, Economic Planning Decentralisation Joseph Mwanamvekha, in an interview, acknowledged that the high debt burden remains one of the fiscal challenges facing the economy.

“We have indicated what needs to be done and how we will achieve that,” he said.

The World Bank further explained that the first missing condition is sustained IMF engagement after Malawi’s Extended Credit Facility (ECF) programme was terminated in May 2025 after only $35 million (about K61 billion) of the approved $175 million (about K306 billion) was disbursed.

The ECF ran for 18 months without programme review.

Currently, Malawi is in negotiations with the IMF for a new programme and last week the global lender commended authorities for implementing strong reforms to tighten fiscal discipline, reduce the public debt burden and improve how markets function.

It said the reforms provide a good foundation for an IMF-supported programme.

Reads the IMF statement: “A programme under the Extended Credit Facility arrangement would support the objectives of macroeconomic stabilisation and inclusive growth.

“It would include policies to sustain fiscal consolidation while protecting social spending, strengthen monetary policy, preserve financial stability and improve governance.”

But the bank said Ghana and Zambia, in contrast, have advanced under the Common Framework with Ghana’s public debt falling from 70.1 percent of gross domestic product at the end of 2024 to 48.8 percent a year later while Zambia has bilateral agreements covering 94 percent of its restructuring perimeter.

Ministry of Finance, Economic Planning and Decentralisation data show that, as at end-December 2025, Malawi’s total public debt stock stood at K24.33 trillion, up from K19.18 trillion at end-March 2025.

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