Malawi is among the world’s least developed countries. Around 85% of the population live in rural areas. The economy is based on agriculture, and more than one-third of GDP and 90% of export revenues come from this. In the past, the economy has been dependent on substantial economic aid from the World Bank, the International Monetary Fund (IMF), and other countries. Malawi was ranked the 119th safest investment destination in the world in the March 2011 Euromoney Country Risk rankings.

In December 2000, the IMF stopped aid disbursements due to corruption concerns, and many individual donors followed suit, resulting in an almost 80% drop in Malawi’s development budget. However, in 2005, Malawi was the recipient of over US$575 million in aid. The Malawian government faces challenges in developing a market economy, improving environmental protection, dealing with the rapidly growing HIV/AIDS problem, improving the education system, and satisfying its foreign donors that it is working to become financially independent. Improved financial discipline had been seen since 2005 under the leadership of President Mutharika and Financial Minister Gondwe. This discipline has since evaporated as shown by the purchase in 2009 of a private presidential jet followed almost immediately by a nationwide fuel shortage which was officially blamed on logistical problems, but was more likely due to the hard currency shortage caused by the jet purchase. The overall cost to the economy (and healthcare system) is unknown.

Many analysts believe that economic progress for Malawi depends on its ability to control population growth.

In January 2015 southern Malawi was devastated by the worst floods in living memory, stranding at least 20,000 people. These floods affected more than a million people across the country, including 336,000 who were displaced, according to UNICEF. Over 100 people were killed and an estimated 64,000 hectares of cropland were washed away.

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