MALAWI

RISK RATING
Elevated
Default High Risk Score 5.80
Normal Average 4.35
Weighted Average 4.13
RISK RATING HISTORY
RISK RATING SCALE

Risk Rating Scale

Severe: 8.0 to 10
High: 6.0 to 7.9
Elevated: 4.0 to 5.9
Moderate: 2.0 to 3.9
Low: 0.0 to 1.9
EXCHANGE RATE
Country Outlook

The government’s anti-corruption crusade is inadvertently threatening to fracture the governing coalition as Malawi’s post-2020-elections political dynamics are shifting. Resultant policy paralysis and a likely resumption of street demonstrations are growing risks, while the government will need to secure further credit financing and donor backing to support 2021 spending and to meet its expensive campaign pledges. Unlike other regional countries, Malawi’s economy will struggle to recover in 2021 due to continuing drops in revenues from tobacco sales. Popular frustrations over governance issues and socio-economic hardships are likely to lead to a rise in anti-government sentiment as Malawi suffers from a lack of foreign-exchange reserves and fuel shortages. Civil society groups largely take the lead in co-ordinating protests.

  • President Lazarus Chakwera is seeking to build up his political capital by driving high profile corruption investigations against officials in the previous government led by the DPP, now in opposition. One inadvertent effect of the targeting of DPP officials in the anti-graft crusade, is that the former formidable ruling party is beginning to unravel, and various DPP factions are seeking alliances with the UTM party of Vice-President Saulos Chilima, who is in a power-sharing coalition with President Chakwera‚Äôs MCP. Chakwera has unofficially pledged to serve as president for one term only, and support Chilima for election to serve the next. However, the so-called Tonse Alliance between the MCP and UTM is fragile as Chilima and Chakwera have previously opposed each other. Chilima could defect the Tonse Alliance and challenge Chakwera in 2025.
  • The avoidance of a political crisis has mitigated the immediate risk of political instability and further politically motivated unrest, at least for now. The potential for more violence following the 2020 re-run polls had posed a disruptive factor for the country‚Äôs already fragile economy. But economic, industrial, and politically motivated protests and strikes are likely to increase over the next year. Popular frustrations over governance issues and socio-economic hardships are likely to lead to a rise in anti-government sentiment as Malawi suffers from a lack of foreign-exchange reserves and fuel shortages. Civil society groups largely take the lead in co-ordinating protests. Some 2.8 million Malawians will require food aid due to an ongoing drought.
  • Malawi‚Äôs economy will struggle to recover due to continuing drops in revenues from tobacco sales. Malawi‚Äôs economy is reliant on sales of tobacco, tea, and sugarcane, with growth having slowed in recent years because of an El Nino-induced drought, electricity shortages, and political uncertainty. Countless companies have closed in 2020, which has further reduced the tax income. Shrinking revenues are likely to lead into increased government borrowing to maintain some level of support to key sectors including health, education, and agriculture, consequently increasing the public debt. Chakwera is seeking to improve relations with western donors and investment partners to boost the government‚Äôs standing with multilateral institutions and development agencies whose support will be desperately needed to combat the economic crisis triggered by the pandemic. This stance will limit the risk of contract reviews and cancellations.
CUMULATIVE AND DAILY COVID-19 INFECTIONS AND DEATH RATE
INTERNATIONAL MONETARY FUND | DATAMAPPER
Risk Perils
Political Instability
3.5
Expropriation, Nationalisation, Confiscation & Deprivation
4.5
Contract Frustration & Breach
4.5
Taxation
4.5
Bribery & Corruption
4.5
Regulatory Burden
4.8
Strikes, Riots & Civil Commotion
4.2
Security
2.2
Sovereign Default
5.0
Economic Volatiliy
5.8

Risk Rating Scale (small)

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