World Bank presents a special topic on ‘Healthy Watersheds for a Strong Economy’

* Healthy watersheds can benefit everyone in Malawi, but they need to be cared for and nurtured

* “Human activities are increasingly detrimental to the health of Malawi’s watersheds

* The rapid conversion of land for agriculture and widespread deforestation for wood are proceeding at an alarming rate

* Forest cover has declined from 47% in 1975 to just over 20% in 2021

By Duncan Mlanjira

Watersheds play a crucial role in sustaining the ecosystem, biodiversity, wildlife, agriculture, and human population by serving as the natural resource base for all forms of life, says the World Bank in its 18th edition of the Malawi Economic Monitor.


Presented to key stakeholders that included government officials on February 27, the publication says natural boundaries of river catchments form a mosaic covering the entire land surface of the earth.

“Watersheds describe areas of land that feed water to a river, draining through the landscape into tributaries and main river channels,” says the Malawi Economic Monitor’s special topic, that “examines the opportunities to redirect funds currently allocated for agricultural and forestry inputs toward a more explicit emphasis on watersheds”.

“It explores why a stronger focus on watersheds is important for Malawi, discusses options for financing interventions aimed at rehabilitating the country’s degraded watersheds, and suggests ways to enhance the involvement of the private sector.”

The publican further says the health of Malawi’s watersheds is impacted by rising population density: “Since 1970, Malawi’s population has surged from just over 4.6 million to nearly 21 million at the start of 2024.

“The majority of the population resides in rural areas and is characterized by poverty and a heavy reliance on natural resources for sustenance. Consequently, rapid population growth exerts substantial pressure on natural ecosystems.

“Current livelihood strategies are pushing the natural environment to a critical threshold, where it may soon be incapable of providing the necessary services to safeguard both livelihoods and infrastructure. This jeopardizes the resilience required to address the challenges posed by a changing climate.

“Human activities are increasingly detrimental to the health of Malawi’s watersheds. The rapid conversion of land for agriculture and widespread deforestation for wood are proceeding at an alarming rate.

“Forest cover has declined from 47% in 1975 to just over 20% in 2021. Deforestation, coupled with forest deterioration and the loss of trees on farms, significantly contributes to land and water degradation.

“In 2017, ‘hotspots’ of degradation, where multiple indicators of degradation converge, covered over 40% of the country. Currently, approximately 75% of Malawi’s soils are degraded or are threatened by degradation.

“This degradation has a cascading effect on the quality and quantity of water resources. Runoff from degraded landscapes carries soils and agrochemicals, polluting watercourses and wetlands.

“This can lead to the loss of soil fertility and diminishes the overall capacity of watersheds to protect, conserve, and nurture embedded natural resources.”

The World Bank observes that this trend is worsened by changing climate patterns as “Malawi is already witnessing increased climate variability, characterized by higher temperatures, prolonged dry periods, and more erratic and intense rainfall”.

“These patterns are likely to lead to more frequent droughts and flooding (GoM 2017; World Bank 2022). Such changes exacerbate soil erosion and land degradation, resulting in reduced agricultural productivity, an increase in vector-borne diseases, and an elevated risk of damage to infrastructure.”

In trying to mitigate rampant deforestation, which leads to massive siltation of rivers that feed the Shire River, Electricity Generation Company (EGENCO) initiated annual tree planting exercise as its hydro generation plants at Nkula, Tedzani and Kapichira are constantly being challenged with siltation and other debris because there are no trees to block them.

The World Bank also observes that the hydropower plants often struggle to meet peak demand due in part to low flows and sediments resulting from the degradation of upstream catchments — “a predicament that climate change will intensify”.


“Recent years have seen flooding alone cost the country 5% of its GDP (GoM 2023), and a recent study found that soil loss could increase by three to four four times compared to 2010 baseline levels (Asfaw et al.,2020).

“Cyclone Freddy in 2023, causing losses and damage exceeding US$500 million (approximately 3.8% of GDP) and displaying 2.5 million people, serves as a warning of impending shocks. However, analysis in the World Bank’s recent ‘Malawi Climate and Development Report’ indicates that acting to reduce soil erosion and improve land management can lead to significant economic gains under a variety of climate scenarios (World Bank 2022).

“Addressing land degradation presents economic opportunities with substantial financial returns. Aligned with the MM2063 vision, investing in watershed restoration activities has the potential to substantially reduce soil erosion rates, improve crop productivity, and enhance water storage.”

The publication also quotes a recent study (Kirui 2016) that estimates that every dollar invested in restoring degraded land would return US$4.3 (in net present value) over 30 years.

“The technologies required for restoration are standard soil and water conservation practices, including terracing, bunding, tree planting, and the utilization of more organic fertilizers. A government assessment indicates that restoring degraded cropland could boost maize production by 40 percent, benefitting small holders who adopt restoration practices (GoM 2017).

“Moreover, carbon markets also present financing opportunities: the restoration of Malawi’s forests, coupled with policies to reduce biomass dependence, could increase Malawi’s carbon stocks by 148 Mt by 2050. This has the potential to generate earnings of between US$24.8 million and US$74.3 million per year (World Bank 2022).”


Thus the World Bank maintains that revitalizing precious natural resources requires putting existing policies into practice, saying: “Malawi’s policy framework for watersheds is relatively strong, yet government implementation remains poor.

“The government’s vision for watershed management is ambitious and incorporates sensible technical approaches. However, both local and central governments struggle to implement policy and legislation.

“Cross-sectoral coordination and collaboration is weak, monitoring is limited, and compliance is low.

“Successful land restoration interventions across the country offer scalable models. These include effective forest co-management, profitable agroforestry, sustainable agricultural practices, private sector forestry investments, and community-focused payment-for-results schemes.

“While these interventions have proven successful on a relatively small-scale, they are often linked to donor-funded or NGO-led initiatives. “Scaling up these models would require collaboration across government agencies, the enhancement of government staff skills, and a realignment of budget priorities.”

The publication also takes note that “certain existing policies create incentives for farmers to engage in unsustainable land management practices. Government subsidies, like the affordable input program (AIP), place too much emphasis on mono-cropping and the use of inorganic fertilizers.

AIP fertilizer


“While this approach may lead to short-term yield gains, it contributes to long-term land degradation. An alternative approach would be to redirect these funds to support on-farm conservation practices.

“Additionally, insecure land tenure creates a situation in which farmers lack the incentive to invest in the long-term health of their land.

“A key challenge lies in establishing suitable financing frameworks to attract and support both public and private sector investment. While existing public funding sources like the AIP, the Forest Development & Management Fund, the Climate Fund, and the National Parks & Wildlife Fund could be repurposed or refocused, practical watershed investments will require a blend of public and private investments.

“Developing suitable business models is essential to incentivize and support investments from both sectors. One effective tool is the use of revolving community funds, which can promote conservation, restoration, and sustainable resource management when linked to larger funds with stringent environmental criteria.

“Illustrating this principle, a pilot project in the Shire communities for a local ‘environmental conservation fund’ demonstrated that even small resources can serve as a significant incentive for voluntary community action, as long as the funds are earmarked for agreed conservation activities.

“Approaches involving ‘results-based payment’ offer an alternative method for providing donor finance and encourage the cross-sectoral collaboration required to rehabilitate watersheds at scale.

“While public funds should be channeled towards watershed rehabilitation, it is crucial to supplement them with private sector investments — especially in areas such as forest plantations, contract farming, and carbon farming, where watershed rehabilitation aligns with profitable investment opportunities.

“The challenge is not only in implementing technical interventions but also in establishing effective institutional arrangements to manage and support these types of interventions.

“Experience in Malawi and elsewhere underscores the importance of careful design that includes both technical and institutional support for ensuring the long-term sustainability of watershed rehabilitation efforts.”

The World Bank asserts that watershed rehabilitation is expensive but will have widespread benefits and is critical for Malawi’s sustainable future, saying: “Enhancing the sustainable management and utilization of watersheds offers opportunities to boost Malawi’s economic performance.

“Healthy watersheds play a crucial role in building resilience to climate risks by providing cover against floods and holding water to mitigate droughts. Moreover, these improvements can contribute significantly to establishing more dependable and sustainable livelihoods — particularly benefiting economically vulnerable households.

“Any action to halt degradation and support the rehabilitation of Malawi’s watersheds will generate benefits for the entire population — it should be considered a priority for the country.

“Transforming environmental deterioration into opportunities for economic growth necessitates the complementary protection of land, forest, and water resources.

The necessary policies and strategies are already in place. The challenge lies in shifting the focus and priorities to ensure that these existing plans are translated into practice.”

In achieving this shift in healthy watersheds for a strong economy, the Malawi Economic Monitor offers some recommendations on how they can be, which include:


1. Redirecting existing agricultural practices to increase productivity by protecting and conserving land, rather than degrading it;

2. Broadening land tenure rights to incentivize sustainable land husbandry;

3. Exploring the potential to use results-based payments such as the successful Community Environment Conservation Funds (CECF).


1. Aligning forestry and energy policies;

2. Using limited public financing to leverage additional private-sector investment in first management and restoration;

2. Ensuring prices charged by the Forest Management and Development Fund reflect current market prices;

3. Scaling up forest co-management approach to balance responsibility and authority between communities and government;

4. Promoting agroforestry and tree-based systems to reduce pressure on Malawi’s natural forests.


1. Ensuring that institutional mandates in the water sector are implemented and enforced to realize the benefits of existing policy reforms (such as Malawi Resources act, 2013);

2. Strengthening systems and capacities for licensing, allocation, and monitoring of water use.

Malawi Economic Monitor provides an analysis of Malawi’s economic and structural development issues, which is part of the ongoing series published twice each year.

It intends to foster better-informed policy analysis and debate regarding the key challenges that Malawi faces in its endeavour to achieve inclusive and sustainable economic growth.