Financing the Right to Health: The Impact of the Sovereign Debt Crisis on Malawi

*Editor's note: This blog is the fourth in a series addressing the global debt crisis. Read the first, second, and third.

In 2007, the government of Malawi invited Partners In Health to work in Neno, an impoverished, rugged district of 165,000 people characterized by its hills, maize and potato fields, and weak health care infrastructure. Most pressingly, local farmers, earning less than $1 per day, were suffering some of the worst rates of HIV on the continent. Roughly 1 in 7 adults in the district were infected.

Upon arriving, PIH staff helped construct health centers; hired and trained hundreds of people in the community as health workers; and built Neno District Hospital as the centerpiece of a revitalized health system. HIV survival rates in the district became the highest in the country, with 90 percent of patients alive one year after starting treatment.  

Since then, PIH Malawi, known locally as Abwenzi Pa Za Umoyo (APZU), has worked in partnership with the Malawian government to provide health care to thousands of people in the remote, southern Neno District. Before APZU arrived, Neno had one hospital with four inpatient beds, no functioning laboratory, and an unreliable water and electricity supply. Now, with the support of APZU, Neno has two hospitals, 13 health centers, and a large network of community health workers offering treatment for everything from HIV and malnutrition to mental health support and diseases such as hypertension, diabetes, and sickle cell anemia.

The World Bank currently classifies Malawi as one of the poorest countries in the world. It’s also one of the most vulnerable to the climate crisis, as approximately 80% of its economy depends on agriculture. In the 2022-2023 fiscal year, Malawi spent roughly a third of its budget on debt interest payments alone. Meanwhile, Malawians suffer from shortages of essential goods like food, fuel, and medicines, with over 70% of the population living below $2.50 a day.

As PIH takes a human rights-based approach to health financing, it’s impossible to ignore the implications of unfair global economic structures on health as a human right.  

A Need for Relief in Malawi

Malawi gained independence from the British in 1964, and in the 70s began to take on debt to finance social programs and infrastructure projects. Over the next decade, Malawi’s debt rapidly increased as interest rates rose and the prices of key exports, such as tobacco and tea, fell, pushing the country into an economic crisis. During the 80s and 90s, estimates from Debt Justice project that over $100 million of debt payments left Malawi each year, even as the country struggled to manage drought, food shortages, and hosting over one million refugees from Mozambique.

“The implications are enormous because they translate to the rising of prices, and it has led to issues around the standard of living,” Makhumbo R. Munthali, director of partnerships and grant acquisition for APZU, said.

In 2001, Malawi entered the Heavily Indebted Poor Countries (HIPC) Initiative, a program launched by the International Monetary Fund (IMF) and World Bank in 1996 to help developing countries with high levels of debt and poverty. When their program was completed in 2006, Malawi received nearly $3.1 billion of debt relief in the form of cancellation and rescheduling, reducing debt from over 100% of GDP to less than 20%.

However, to unlock that relief, Malawi had to implement IMF and World Bank structural adjustment policies to consolidate spending, which included ending agricultural subsidies and selling grain stocks. In 2002, the Malawian government sold the maize from its national food reserve to raise funds to help repay loans. Combined with a poor harvest that same year, this resulted in a serious food shortage, causing widespread hunger and starvation that impacted nearly 7 million of Malawi’s population of 11 million people, killing thousands.

“We see that social aspects, the concern and welfare of those that are vulnerable, are not taken into consideration when these agreements are being made,” Munthali said. “This becomes a serious concern for PIH as a social justice organization.”  

In the 2003-2004 fiscal year, as Malawi struggled to implement IMF programs to obtain debt relief, the government spent 23% of its budget on servicing debt, while spending 11.5% on health care and 12% on education.  

Even after receiving some debt cancellation, Malawi’s external public debt began to climb again. Climate shocks and the COVID-19 pandemic further plunged the economy into distress, and Malawi defaulted on its debt in 2022. With fiscal adjustments and Malawi reaching the maximum amount of lending it can obtain from the IMF, the country will remain economically unstable unless its external debts are restructured.  

However, of Malawi’s nearly $4 billion of public debt, $2.6 billion is owed to multilateral development banks like the IMF, which is not eligible for restructuring. One-third is eligible for restructuring, most of which is owed to banks and other private creditors. Negotiations are currently ongoing to obtain this relief, and Malawi is relying on creditors to take steep losses to close the gap.

Terms and Conditions

Currently, austerity measures implemented by the IMF in Malawi restrict the hiring of health care and education professionals. Despite their training and qualifications, and the tremendous need for more health workers, nurses, and teachers graduating from institutions within Malawi cannot currently be hired in the public sector due to wage bill constraints.  

These measures are forcing limited existing staff to bear the brunt of the workforce shortage, and the health and well-being of the people of Malawi also suffer as a result.  

“Our motivation when we are pushing for the removal of these austerity measures is centered on the patient,” Munthali said. “At the end of the day, where there is increased recruitment of health care workers, we also know that service delivery will be improved, we will have medicines in hospitals, and people in very hard-to-reach areas will be able to access services.”

As a way to push back against these restrictions, APZU began participating in the Universal Health Coverage Coalition in 2023 alongside sixty other organizations—including Oxfam, Last Mile Health, and Action Alliance—to organize advocacy efforts.  

“Just two years ago, various organizations in Malawi gathered under what is known as Universal Health Coverage Coalition to find ways on how we can support the government and other actors to push for the reduction or removal of these constraints that are really having serious implications on the health sector,” Munthali said. “This coalition decided to come up with a strategy that is going to help in terms of having an organized, systematic way to push for reforms.”

Over the next three years, two areas the coalition hopes to focus on are the inadequate health workforce and the lack of transparency from the Minister of Finance and the IMF. Other sectors, including the Minister of Health or Education, that are largely impacted by their decisions, are excluded from current discussions around the conditions of loans between the Minister of Finance and the IMF. Even the Parliament, as a legislature, is left out of this decision-making process.  

“Let there be open dialogue, transparency, inclusivity in these negotiations,” Munthali said.

The Fight for Fairness

The debt crisis is a large, complex, and interconnected issue directly impacting the well-being of people around the world—including APZU’s patients. As PIH teams globally continue to advocate for fair and equitable lending and payment practices, we hope you will join us in fighting this injustice.  

“While the wheels may take time to turn, we are hopeful that our voices will be heard,” Maria Chiwoni, APZU partnership officer, shared. 

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