Malawi - Economy

Economy

Main article: Economy of Malawi See also: Malawian food crisis

Malawi is among the world's least-developed and most-densely populated 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.

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.

In addition, some setbacks have been experienced, and Malawi has lost some of its ability to pay for imports due to a general shortage of foreign exchange, as investment fell 23% in 2009. There are many investment barriers in Malawi, which the government has failed to address, including high service costs and poor infrastructure for power, water, and telecommunications. As of 2009, it was estimated that Malawi had a GDP (purchasing power parity) of $12.81 billion, with a per capita GDP of $900, and inflation estimated at around 8.5% in 2009.

Agriculture accounts for 35% of GDP, industry for 19% and services for the remaining 46%. Malawi has one of the lowest per capita incomes in the world, although economic growth was estimated at 9.7% in 2008 and strong growth is predicted by the International Monetary Fund for 2009. The poverty rate in Malawi is decreasing through the work of the government and supporting organizations, with people living under the poverty line decreasing from 54% in 1990 to 40% in 2006, and the percentage of "ultra-poor" decreasing from 24% in 1990 to 15% in 2007.

Malawi was ranked the 119th safest investment destination in the world in the March 2011 Euromoney Country Risk rankings.

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