By Benadetta Chiwanda Mia:
Malawi could be facing mounting economic and humanitarian crises following the suspension of United States (US) foreign assistance programmes.
The US has slashed aid flows by an estimated 59 percent in 2025 alone.
This is according to a new policy report released in April by the International Food Policy Research Institute (IFPRI).
The report, co-authored by National Planning Commission (NPC) researchers, warns that the sudden withdrawal of US support could cost the Malawian economy more than $1.3 billion in cumulative gross domestic product (GDP) losses over the next six years and push 435,000 additional people into poverty by 2030 if corrective measures are not taken.
The report estimates that the US disbursed over $431 million in official development assistance in 2023, accounting for a quarter of the country’s total aid and more than three percent of its gross national Income.
It indicates that annual foreign assistance disbursements have averaged over $360 million between 2020 and 2023.
The suspension of aid in January 2025 has, therefore, left critical sectors scrambling to stay afloat.
“The scale and suddenness of these cuts have exposed Malawi’s vulnerability. The country lacks economic buffers to withstand such a shock, making the consequences especially severe,” the report states.
The IFPRI study used economy-wide modelling to simulate the impact of aid cuts, predicting a 1 percent GDP decline in 2025—roughly $127 million—compared to a baseline scenario without aid reductions.
Foreign exchange inflows are expected to fall by $177 million, equivalent to 6.3 percent of Malawi’s merchandise import bill, further pressuring the Kwacha and inflating import prices.
“The combination of reduced aid-financed activity and loss of foreign exchange is squeezing both public services and private sector operations. The result is lower productivity, higher costs and increased poverty,” it states.
Health programmes, which received 57 percent of US bilateral aid in 2023, are the hardest hit according to the report.
It indicates that an estimated 48 to 51 percent of US-funded health programmes have been terminated or suspended, including nearly all maternal and child health initiatives.
As of March 2025, more than 4,400 health workers had lost their jobs and 18 HIV drop-in centres were shut down, according to United Nations Aids Programme.
IFPRI economists are, therefore, imploring the Malawi Government to adopt a more flexible exchange rate and introduce trade facilitation reforms to cushion the blow.
Under such a policy shift, cumulative GDP losses could be reduced by 26 percent and poverty impacts nearly halved, the report estimates.
The authors also call for improved integration of donor-funded services into national systems, better targeting of essential services and diversification of funding sources to reduce reliance on any single donor.
“Increased fiscal space can help the government better address unexpected shocks. Currently, high fiscal deficits are driven in large part by statutory expenditures and insufficient revenues.
“However, there is already significant scope to improve public finances by increasing tax collection and improving the efficiency and efficacy of public expenditures,” it adds.
