Malawi’s path towards achieving the goals of its long-term development vision remains feasible but narrow, according to the latest World Bank Malawi Economic Monitor.
The country’s prolonged macro-fiscal crisis is exacerbated by extreme weather events, slow debt restructuring and delayed governance reforms.
The new report shows improved political commitment, investment and reforms in the energy sector could help growth by pushing access to electricity above 50 percent by 2030.
The 17th bi-annual analysis of Malawi’s economic and structural development issues, Powering Malawi’s Growth: Rapidly and Sustainably Increasing Energy Access, shows that economy has had a difficult start in 2023.
Economic growth is expected to increase only slightly, reaching 1.4 percent in 2023, due to longstanding macroeconomic imbalances, an ongoing debt and balance-of-payments crisis as well as the impacts of Tropical Cyclone Freddy, with the energy crisis only partially offset by the restoration of Kapichira hydropower plant.
Cyclone Freddy is estimated to have caused production losses equivalent to $36.4 million.
The World Bank analysis has shown that without significant investments in climate adaptation, the impacts of climate change will lead to GDP losses of three to nine percent in Malawi by 2030.
World Bank Country Manager Hugh Riddell says: “Malawi’s economy is weakened by foreign exchange shortage that constrain the import of essential commodities and inputs and that lower agricultural output as well as by erratic electricity supply and the increasing frequency of natural disasters.
“Its poly-crisis needs urgent movement on reforms that promote macroeconomic policy and governance as well as a wide range of policy responses in energy, agriculture, climate adaptation and resilience to create a stronger foundation for economic growth.”
The new monitor indicates that although the country has the stronger strategic and policy framework to increase energy access, expanding electricity access beyond half of its population by 2030, according to MW 2063 Vision, requires impactiful reforms, political commitment and financial resources.
Rapidly scaling up electricity access makes it crucial to enhance institutional capacity for grid expansion and off-grid investments, improve governance for operational and financial efficiency and to adaptive approaches that fine-tune their implementation.
Weddy Gughes, World Bank infrastructure director for east and southern Africa says the bank’s energy access programme will continue to support the Malawi Government to take bold reforms in the energy sector to it can sustainably drive universal access and economic growth.
“Empowering every Malawian with access to reliable and affordable energy is not just a vision, but a commitment we hold steadfastly,” he said.
The new economic monitor shows that in 2022, Malawi ranked fourth lowest in energy access in Africa, just ahead of South Sudan, Chad, and Burundi.
In 2023, its electricity access rate is estimated at 19 percent- 45 percent in cities and five percent in rural areas-up to 11 percent in 2018.
The increase trickles from the expansion of off-grid solar home system, while access to the national grid has remained stagnant at about 12 percent.
Amid the prevailing economic uncertainty, getting Malawi back on track to meet the 2063 development goals will require major reforms to support increased macro-stability, growth, and resilience.
The new World Bank report calls for restoring macroeconomic stability through increased budget discipline and credibility, as well as for continuing progression towards a market-based exchange rate and containing domestic borrowing.
It also requires investments to boost the private sector’s ability to export, increasing access to reliable power, strengthening agricultural diversification and commercialization, and ensuring the financial sector to better support productive firms.
Source: World Bank