Globally, Sovereign Wealth Funds (SWFs) have attracted significant attention in both the media and academia as more countries adopt these funds as a long-term investment strategy for economic growth.
Chimwemwe Salie Hara: Development Policy Specialist
This trend highlights the growing relevance of SWFs in the modern world. The ongoing polycrisis of global challenges, including economic uncertainty, climate change, trade wars, and geopolitical tensions, has prompted governments to seek alternative methods of building financial resilience.
In 2024, the International Monetary Fund (IMF) and the International Forum of Sovereign Wealth Funds (IFSWF) encouraged nations to establish and use SWFs as mechanisms for social protection and inclusive development. It is important to note that development cooperation has diminished, and trade policies resulting in tariffs under President Donald Trump have adversely affected weaker economies, such as Malawi. The government of Malawi proposed to establish a Sovereign Wealth Fund (SWF), as highlighted by President Peter Mutharika in his 2026/2027 State of the Nation Address, where he outlined reforms in the mining sector. This is a timely strategic decision.
SWFs are government-owned investment funds that countries use to manage and grow their national savings. These funds are typically financed through trade surpluses, revenues from natural resource exports, fiscal surpluses, and sometimes foreign exchange reserves.
They play a crucial role in helping governments stabilise their economies during crises and focus on sustainable development. For example, if Malawi were to establish SWFs, the government could invest in long-term national goals, such as the Malawi 2063 Agenda (MW2063) and the Sustainable Development Goals (SDGs).
In development finance, Sovereign Wealth Funds represent an innovative funding model. In Africa, countries rich in mineral deposits, such as Botswana, have established funds similar to SWFs, which have played a crucial role in their economic development. Therefore, for Malawi to achieve this policy objective, several factors need to be considered, including the framework of state stabilisation funds, savings funds, reserve investment firms, development funds, and pension reserves.
Case studies from countries such as Norway and Canada show that the effectiveness and efficiency of a SWF depend on its institutional framework and governance structure.
The establishment of Malawi’s Sovereign Wealth Fund should reflect the country’s political, economic, and social conditions through a comprehensive situational analysis. Malawi should avoid replicating unsuccessful foreign models without necessary reforms. The SWF’s governance structure should take into account its objectives, funding sources, legislation, investment strategy, and alignment with government policy.
Stakeholder roles, including those of government, fund managers, auditors, and governing bodies, must be clearly defined. SWFs can strengthen the macroeconomic environment through coordination with government institutions, the Ministry of Finance and Planning, and the Reserve Bank of Malawi. However, the fund must operate independently to minimise political interference and potential risks.
Malawi should strengthen its accountability and transparency mechanisms, as countries with weak governance systems often experience corruption, political interference, and economic instability, even when they have abundant natural resources. This phenomenon, known as the “resource curse,” has been observed in the Democratic Republic of Congo (DRC). Therefore, Malawi must ensure that the sovereign wealth fund is supported by a robust institutional framework capable of facilitating national transformation.
Malawi faces significant socio-economic challenges, including extreme poverty, high unemployment, poor road infrastructure, limited electricity supply, and low levels of industrialisation. Additionally, global shocks have negatively impacted the country’s economic development. However, the growth of mining activities presents an opportunity for economic transformation, provided that resource revenues are managed effectively in line with the country’s development needs.
To ensure Malawi’s sovereign wealth fund supports inclusive development, the country should establish a strong legal and institutional framework that penalises the misuse of resources. The fund should be established through an Act of Parliament that defines its objectives and protects it from political interference, particularly during elections.
Malawi has previously seen development institutions, such as individual funds for personal gain. Without a strong mechanism in place, the sovereign wealth fund risks corruption and elite capture by politicians and elites.
To achieve inclusive development, Malawi’s sovereign wealth fund should support domestic projects that promote productivity and economic diversification. Investments in energy, infrastructure, irrigation, manufacturing, education, and technology can stimulate industrialisation, create youth employment, and reduce dependence on agriculture and donor aid.
Sovereign wealth funds should recognise that good governance improves performance and builds trust among citizens and investors. Embedding these principles from the outset will help the fund remain resilient and aligned with the MW2063 agenda and SDGs. Malawi must establish fiscally disciplined institutions to secure long-term investments.
The author is an independent global governance, development management, and public policy analyst and consultant. He is also Programmes Adviser – Governance and Sustainable Livelihood Development, Oxfam in Malawi and Africa, The Netherlands. He writes in his personal capacity.
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