The World Bank has warned that rising public debt is becoming a major threat to economic growth in developing countries, including Malawi, as governments spend more money servicing loans and less on development.
In its June 2026 Global Economic Prospects report, the World Bank says debt levels in emerging market and developing economies have risen sharply over the past 15 years, increasing pressure on public finances and raising the risk of debt distress.
The report indicates that government debt in developing economies has increased from below 40 percent of Gross Domestic Product (GDP) in 2010 to more than 70 percent today, largely due to domestic policy decisions and a series of global shocks.
According to the World Bank, the growing debt burden is also becoming more expensive to manage.
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Debt servicing costs have nearly doubled, rising from six percent of government revenues in 2010 to an estimated 11 percent in 2025.
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The warning comes at a time when Malawi’s public debt has climbed to K23.9 trillion, equivalent to more than 91 percent of GDP, according to Ministry of Finance figures.
The World Bank says rising debt levels have pushed up borrowing costs across developing economies, making it more expensive for governments to access financing.
The institution further notes that the proportion of low-and middle-income countries either in debt distress or at high risk of debt distress has almost doubled, increasing from 26 percent in 2015 to around 50 percent in 2026.
In an interview, economist Veli Nyirongo said the trend presents serious risks for Malawi, where debt levels are already above sustainable thresholds.
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He said a growing share of government revenue is now likely being used to service debt instead of funding critical sectors such as health, education, infrastructure and social protection.
“Rising debt beyond sustainable levels becomes a structural barrier to development in the medium to long term. This reduces the government’s ability to respond to shocks such as droughts, floods and global price increases, which Malawi is highly exposed to.
“If current trends continue, Malawi could face a prolonged period of weak economic growth, low investor confidence and greater dependence on external support. We need stronger tax administration and a wider tax base rather than simply increasing tax rates. Transparency and debt management capacity must also be strengthened to avoid unsustainable liabilities,” Nyirongo said.
The concerns come as the government is facing a fiscal deficit of K2.8 trillion this financial year, representing nine percent of GDP.
Meanwhile, the World Bank has revised Malawi’s economic growth projection for 2026 downwards to 2.3 percent from 2.6 percent projected in January, highlighting continued challenges facing the economy.
The latest debt warning suggests that unless borrowing is brought under control and growth accelerates, Malawi’s already limited fiscal space could come under even greater pressure in the years ahead.
