Malawi continues to be rated “mostly unfree economy” as seen in the latest 2025 index of Economic Freedom, an annual guide published by the Wall Street Journal and the Heritage Foundation.
Malawi’s economic freedom score at 50.9 percent makes the economy of the South East African country the 146th freest in the 2025 index which has ranked 177 economies across the world. This is a drop by 1.2 points from its 2024 ranking. The country mostly known for its beautiful lake and the friendly people is ranked 34th out of 47 countries in Sub-Saharan region. The score is lower than the world and regional averages.
Economic freedom is defined in the report as the fundamental right of every human being to control their own labour and property. The index covers rule of law, government size, regulatory efficiency and open markets.
The country’s last best performance in the ranking was in 2014 when it was ranked 22nd out of 46 Sub-Saharan countries. The report says Malawi lags behind in competitiveness and promotion of the broad-based economic activity that is needed to reduce poverty. It points out the poor state of its infrastructure and inefficiency as some of the bottlenecks.
“The poor quality of physical and legal infrastructure is exacerbated by the government’s inefficiency and this has been a serious impediment to long-term economic development. The inefficient business framework is slowly being improved,” the report says.
It goes on to say that labour regulations are not generally enforced, and the labour market remains poorly developed in a country where majority are still employed outside the formal sector, largely in agriculture.
On monetary freedom, the report says the environment is very inefficient and not conducive to entrepreneurial activity and the monetary freedom score is below the world average.
On rule of law, the report says it is still weak. The protection of property rights remains poor with more than half of the arable land still untitled while the judiciary is seen as independent, it is inefficient and weakened by poor record keeping, a shortage of attorneys and other trained personnel, heavy caseloads and lack of resources. The judiciary effectiveness score slightly above 50 percent while government integrity score is at 34.4 percent which is a score below the world average.
The report observes that progress on improving Malawi’s regulatory framework has been slow with the inefficient state-owned enterprises continuing to undercut the development of a dynamic private sector with government spending nearly US$190 million on subsidies each year for the past five years, with 50 percent of it being spent on agriculture yet with little returns.
Government has for the past two decades running a fertilizer subsidy programme targeting 2 million subsistence farmers with two 50 kilogrammes bags of urea and NPK. While this had success in making the country food secure in its early years during the leadership of third president, Bingu Wa Mutharika, the programme has seldom helped the country since.
The programme has faced several challenges such as low supply at selling points, accusations of corruption and a lack of support from suppliers which has led to agriculture experts to question its effectiveness and recommending a shift to large scale farming as an alternative. However, despite the programme having gone through four presidents since inception, none has been bold enough to scarap off in favour of a more effective and sustainable intervention.
For the past decade, Malawi has been experiencing perpetual food insecurity which has led to high inflation and a weakened currency which at the moment is trading 4000 Kwacha to US$1, a 300 percent loss of value as compared to four years ago.
Various stakeholders have been calling for the abolishment of the fertilizer subsidy programme arguing it drains the public purse yet delivering and are calling for other investment ventures within the sector with potential larger returns as pointed out by one agriculture expert, Tamani Mvula who says, current fertilizer subsidy set up which eats out 45 percent of Malawi’s agriculture budget, is not bringing desirable results.
“Despite the large investment in the farm inputs subsidy programme which targets maize, production only increased by 230,000 metric tonnes between 2022 and 2023. It is time we need to focus on large scale farmers who through the subsidy, can create jobs for the poor while making the country food secure,” he said.
Another expert, Esmie Kanyumbu says the number of people living in poverty is expected to increase this year amidst the challenging economic environment and the rising food insecurity, with an additional people falling below the $2.15 per day threshold.
“Due to economic challenges and the rising food insecurity, an additional 417,000 people will fall below the poverty line which will bring the total number of people living in poverty in Malawi to 15.8 million out of the 21 million population the country has,” she said.
Malawi’s economy is heavily dependent on agriculture which employs over 80 percent of the population. However, most of the farming is rain-fed and with climate change nowadays, it is vulnerable to external shocks, particularly climatic shocks.
Recently, government launched the Malawi 2063 Vision which is a blueprint that aims to transform the country into a wealthy, self-reliant, industrialized upper-middle-income country through a focus on agriculture commercialization, industrialization and urbanization.
The Heritage Foundation uses twelve economic freedoms index namely Property Rights, Government Integrity, Judicial Effectiveness, Tax Burden, Government Spending, Fiscal Health, Business Freedom, Labour Freedom, Monetary Freedom, Trade Freedom, Investment Freedom and Financial Freedom to rate countries with the following score rates; Free, Mostly Free, Moderately Free, Mostly Unfree and Repressed.
In the latest ranking, a total of 176 countries were rated with only three earning a designation of economically “free” by scoring 80 or more, 26 earned a designation of “mostly free” by scoring between 70.0 to 79.9, and an additional 58 countries were considered at least “moderately free” with scores of 60.0 to 69.9. Thus, a total of 87 countries, or slightly less than half of the 176 countries graded, have institutional environments in which individuals and private enterprises benefit from at least a moderate degree of economic freedom in the pursuit of greater economic development and prosperity.
About 50 percent of the countries graded in the 2025 Index, a total of 89, have registered economic freedom scores below 60. Of those, 60 economies are considered “mostly unfree” with scores of 50.0 to 59.9 while 29 countries, including China and Iran are in the economically “repressed” category.
There has been a mixed score for Malawi’s three neighbours with Tanzania ranked highest at 92 with the score of 59.3 while Zambia is four steps above Malawi with a score of 50.9, and Mozambique is one step below with a score of 50.7.
Singapore continues to be the world’s freest economy, demonstrating a consistently high level of economic resilience and prosperity. Switzerland comes second, followed by Ireland. Republic of China-Taiwan, is fourth, a highest ever position it has achieved in the Index of Economic Freedom.