Frank figured out how to make a living in one of the most difficult places in the world. In Malawi's Milepa market, he found his trade. "I learned how to repair motorcycles in 2020 and eventually opened my own shop. Over time, I built a name for myself, the business grew, and I even got married, knowing I could provide. But in the past couple of weeks, my daily income has gone down, and rising fuel prices are making it harder to keep that alive."
Frank is not alone. Across the world's poorest countries, three overlapping crises are compounding: fiscal fragility, the collapse of aid, and an energy shock that still reverberates despite a fragile ceasefire. The people most exposed have no buffer. And with governments and international institutions still reaching for the wrong tools, it is direct cash transfers—the most rigorously evidenced tool available—that have to fill the gap.
A government in crisis and a mandate for change
The first and deepest crisis is fiscal. As a joint African Development Bank, UN, and World Bank report put it in late 2025, Malawi is experiencing its most severe economic crisis since independence. Debt service consumes over half of domestic revenue. Foreign exchange reserves have fallen below one month of import cover. Malawi is an extreme case—the world's poorest peaceful country—but the dynamic there is not unique. Across sub-Saharan Africa, at least 22 countries are in or at high risk of debt distress. Ghana, Zambia, and Ethiopia have all defaulted or entered restructuring.
In Malawi, this is not only a story of bad luck. A joint paper by Malawi's National Planning Commission (NPC) and IFPRI, published in April 2026, is direct: "Policy choices have stifled growth and amplified vulnerabilities." An overvalued official exchange rate has "become largely irrelevant to the real economy, restricts access to foreign currency and pushes exports into informality, causing serious economic harm without delivering price stability." Malawians drew their own conclusion. In September 2025, they voted out President Chakwera in a landslide, returning Peter Mutharika with 57 percent of the vote in a campaign dominated by economic frustration. The new government has a mandate to govern differently, but for now, words have not been followed by action.
The withdrawal of aid
The second shock is the abrupt withdrawal of external support. Foreign donors have historically funded up to 95 percent of Malawi's national Social Cash Transfer Programme (SCTP), the primary safety net for the ultra-poor. The government is now planning a major reduction in coverage affecting tens of thousands of the country's most vulnerable families. The evidence on this programme's impact on consumption, food security and financial resilience is strong, but now the money behind it is drying up. Across sub-Saharan Africa, aid cuts are removing safety nets precisely when external shocks are hitting the poorest hardest.
The fuel shock is still live, and still dangerous
Into this already fragile situation came the Iran war. At its April 2026 peak, Malawi's petrol reached $3.85 per litre—the second most expensive globally in absolute terms. The fragile ceasefire has brought some relief, but analysts warn that damage to Gulf infrastructure and ongoing security risks mean any recovery will be partial. Prices remain well above pre-war levels, and the underlying vulnerability is unchanged.
Because Malawi imports all of its fuel, fertilizer, and pharmaceuticals, the ripple effects run across the entire economy. As Lee Crawfurd and Eeshani Kandpal document in a CGD blog post, the poorest quintile suffers most—food and transport consume the largest share of their budgets. According to the UN's Middle East conflict brief for Malawi, a sustained shock could push headline inflation to 35–45 percent and food insecurity from 20 percent of the population to 30–40 percent. A fertilizer supply disruption during the October–December planting window (still a real risk given the fragility of the ceasefire) would compound this further.
The wrong tools for the moment
What makes this moment so damaging is the persistence of policy choices that substitute less effective tools for more effective ones, for which both governments and their development partners bear responsibility.
The NPC-IFPRI paper is unsparing: "Even in years with good rains and subsidized fertilizer, only 17 percent of farmers produce enough maize to meet their own household's needs." The number drops to just 5 percent among the poorest quintile. Malawi's food insecurity is an income problem. Most farmers cannot farm their way out of poverty. Yet government action continues to focus on intervening in the maize economy through costly subsidies.
A striking illustration: a recent $45 million World Bank emergency disbursement was used to procure maize from Zambia at allegedly inflated prices. That sum is roughly half the SCTP's entire budget for the next three years, spent on an intervention that cannot reach the majority of food-insecure households who need purchasing power, not grain. An Oxford-led political economy analysis identifies the structural drivers: contractor incentives for maize procurement, political incentives for visible physical aid, and what it describes as "reliable incoherence"—donors simultaneously funding cash infrastructure and in-kind food operations. As Ugo Gentilini, lead economist for social protection at the World Bank, has observed: "While we made huge progress on the evidence front, we may have been less convincing in presenting an equally alluring narrative."
Cash: A catalyst for growth
GiveDirectly, in partnership with the Canva Foundation, is already demonstrating what the alternative looks like. (Disclosure: one of us, Nick, leads GiveDirectly.) The organisation is delivering transfers averaging $670 per adult (adjusted upward from $550 to maintain real purchasing power) to 185,000 adults across the entire district of Chiradzulu. A recipient who receives $670 and uses it to buy livestock, repair a roof, pay school fees, and stock a small business is not just being helped to survive. They are getting the money they need to invest in their future.
A randomised study in Kenya quantified the multiplier effect at $2.50 for every dollar transferred. In Khongoni, after $52 million was delivered—roughly a year of local GDP—prices rose by less than 1 percent. Markets absorbed the capital. GiveDirectly is expanding on these findings through the largest randomised trial on unconditional cash ever conducted, in partnership with Oxford University researchers, and is testing amplification via a supply-side cash pilot providing grants to local businesses one month before surrounding households receive transfers. Achieving growth, as African political economy experts and leading academics argue, is the path out of poverty. The question is whether limited resources can be deployed more effectively to put people on the bottom rung of that ladder.
The choices that matter now
For the Malawi government: exchange rate unification, transparent fuel pricing, and debt restructuring are critical preconditions for restoring fiscal space. In the meantime, the NPC's own analysis supports redirecting scarce state resources away from fertiliser subsidies and maize procurement toward cash transfers, using the robust SCTP infrastructure that already exists.
For the World Bank and multilateral lenders: emergency social protection financing should default to cash. The $45 million spent on maize could have covered 100,000 households with a targeted transfer. Seventy-eight countries are implementing social policy responses to the Iran war shock; cash should be the first-choice instrument, not a fallback.
For bilateral and philanthropic donors, and private capital seeking measurable impact: Malawi is one of the poorest countries on earth, capital is scarce, and the evidence on returns is unambiguous. The delivery infrastructure already exists. The planting window opens in October. The question is whether those with the means to act will do so in time.
Conclusion
What is unfolding across sub-Saharan Africa is not a series of unfortunate coincidences. It is the predictable outcome of fiscal fragility, poor policy choices, and a persistent institutional resistance to putting money directly in the hands of the people these systems claim to serve.
Cash transfers are not a panacea. They will not restructure sovereign debt or build roads. But they do something essential: they provide the capital that allows people to absorb shocks, invest in their lives, and begin the climb that makes everything else possible.
A large cash transfer helped Frank start his motorcycle business in Milepa a few years ago. "After receiving cash, I bought a toolbox, spanners, and benches for customers. I also replaced the grass roof with iron sheets. My daily earnings increased, and the business was doing well. The support helped me improve my shop and grow my business, but now the rising fuel prices are making it harder to keep that alive."
Nick Allardice is president and CEO of GiveDirectly.
