Can US$130m grants help Malawi escape its forex crisis?

Malawi has secured fresh international funding that could help ease pressure on the economy, but the real question is whether the money will deliver lasting relief from the country’s persistent foreign exchange shortages.

Parliament has approved two International Development Association (IDA) grants worth a combined US$130 million, including US$50 million for the Transforming High-Potential Resilient Value Chains Project to boost exports and forex earnings, and US$80 million for the Governance to Enable Service Delivery Project 2.0 to strengthen service delivery and local government performance.

The first grant, equivalent to US$50 million, will finance the Transforming High-Potential Resilient Value Chains Project, while the second, equivalent to US$80 million, will support the Governance to Enable Service Delivery Project 2.0. Both financing agreements were signed between the Malawi Government and the IDA on June 19, 2026.

The export-focused grant comes as Malawi continues to grapple with limited foreign exchange, which has affected businesses and consumers. The project will support targeted firms with advisory services, performance-based grants and access to financing to increase their production and capacity to compete in export markets.

Speaking as MCP spokesperson and Lilongwe Phiri la Njuzi MP Peter Dimba, Dimba described the financing as a potential game changer, saying Malawi’s narrow and declining export base has contributed to the country’s forex challenges. He urged government to ensure that beneficiaries are selected strictly on merit rather than political connections.

Dimba: says the grants are game changer

Dimba also challenged government to avoid unnecessary restrictions on exports, arguing that Malawi needs to maximise every opportunity to earn foreign currency. He said the country cannot afford to restrict products that have demand on international markets while struggling to meet its forex requirements.

UTM Mwanza Central MP Felix Njawala said Malawi must also change the nature of its exports if the country is to fully benefit from the financing. He criticised the continued export of raw commodities such as cotton while Malawi imports finished products made from them, arguing that the practice means the country is effectively “exporting jobs” that could instead be created through local processing and value addition.

The export project will establish a Partial Credit Guarantee Fund to help eligible businesses access credit, alongside local and foreign currency lines of credit for exporters and domestic suppliers. It will also support firms exposed to climate-related risks, potentially strengthening the resilience of Malawi’s export sector.

The second grant, worth US$80 million-equivalent, targets governance and service delivery at local government level. It will provide performance-based grants to district councils and extend the programme to Karonga, Kasungu, Luchenza and Mangochi municipal councils, while supporting improvements in planning, financial management, procurement and contract management.

Finance Minister Joseph Mwanamvekha assured Parliament that merit would guide the selection of beneficiaries under the export project and agreed that financial institutions should not undermine the programme through excessive charges. He also said government would work to reduce bureaucratic delays affecting businesses seeking licences, payments and financing.

The two grants therefore address different but interconnected aspects of Malawi’s development challenge: the US$50 million-equivalent export financing is intended to strengthen the country’s capacity to produce, export and earn forex, while the US$80 million-equivalent governance financing seeks to improve how resources are managed and services delivered at local level.

The bigger test now is whether the financing will move beyond parliamentary approval and translate into more exports, increased foreign exchange earnings, stronger businesses and tangible improvements in the lives of Malawians.