At independence in 1964, Malawi was one of the poorest and least developed countries in the world. It was further disadvantaged when civil war in Mozambique strangled its export trade for more than a decade, and when afflicted with long periods of drought, for example between 1991 and 1994, and in 2002. Yet it achieved substantial growth from the 1960s, based on agricultural exports, especially tobacco.
However, the country’s dependence on agricultural commodities has meant that there have been periods of slow or negative growth, when commodity prices have been depressed or international demand subdued, or in periods of drought. At these times foreign debt grew far quicker than GDP and exports, and debt servicing became a heavy burden.
After one such period in the early 1990s, the government embarked on economic reforms, including stronger fiscal discipline, public spending cuts, greater accountability and a programme of privatisation, and was supported by a series of World Bank structural adjustment loans and IMF stabilisation programmes. In the 2000s, there was investment in some light manufacturing and especially in the production of clothing and textiles for export to the USA.
In 2006, the country qualified for debt relief under the IMF/World Bank Heavily Indebted Poor Countries Initiative – Malawi has one of the lowest per capita incomes in the Commonwealth.
These reforms led to a gradual recovery, with better agricultural performance, higher commodity prices (notably for tea) and increased export earnings. However, during 2000, with a poor maize harvest, weaker tobacco prices and the growing burden on the economy of the loss of skilled workers and health care costs of HIV/AIDS, growth slowed and then in 2001 the economy shrank by more than four per cent. It recovered in 2002 in a climate of persisting drought and generally maintained good rates of growth, becoming strong during 2006–09. Then, following the world economic downturn of 2008–09, there was a brief pause, before growth of at least five per cent p.a. resumed in 2013–15. Keeping inflation under control, however, proved more challenging; it was 27.3 per cent in 2013 and an estimated 19.6 per cent in 2014.