By Benadetta Chiwanda Mia:
The national budget deficit continued to expand over the past six years, estimated at K2.47 trillion in the 2025- 26 financial year, up from K810 billion in the 2020-21 fiscal year.
This represents an increase of over 200 percent.
Similarly, total budget expenditure has surged from K2.33 trillion in the 2020-21 fiscal year, to K8.05 trillion in 2025-26, reflecting a 244 percent increase.
The figures, as compiled by the Malawi Confederation of Chambers of Commerce and Industry (MCCCI), highlight a widening fiscal gap.
For the 2025-26 fiscal year, the national budget is projected at K8.05 trillion, equivalent to 31.1 percent of gross domestic product (GDP).
This marks a nominal increase from K6.14 trillion in the 2024- 25 fiscal year, which accounted for 32.8 percent of GDP.
In its response to the 2025-26 budget, MCCCI expressed concern over the estimated fiscal deficit of K2.47 trillion (9.5 percent of GDP), citing ongoing fiscal pressures.
The deficit is primarily being financed through domestic borrowing of K2.33 trillion (9 percent of GDP) and foreign borrowing of K145.78 billion.
As of December 2024, public sector debt to the banking system stood at K6 trillion, making up 78.9 percent of total domestic credit.
Meanwhile, total public debt had reached K16.19 trillion by September 2024, representing 86.4 percent of GDP—an increase of 29 percent from December 2023.
“The heavy reliance on domestic borrowing poses risks such as crowding out private sector credit, increasing interest rates, and limiting investment opportunities,” MCCCI said.
With total expenditure pegged at K8.05 trillion, the 2025- 26 budget allocates K6.04 trillion (23.3 percent of GDP) to recurrent expenses, which account for 75 percent of total spending.
Meanwhile, K2.01 trillion is designated for development expenditure, representing 25 percent.
Economics Association of Malawi President Bertha Bangara Chikadza highlighted implementation gaps in fiscal measures, particularly reforms related to subsidy programmes like the Affordable Inputs Programme and civil service restructuring.
She said these measures have faced implementation challenges and resistance from political stakeholders and the public.
Chikadza also pointed out that the government’s fiscal consolidation efforts have been complicated by external shocks such as the lingering effects of Covid and weather-related disasters, which have increased social spending pressures, making expenditure cuts difficult without exacerbating vulnerabilities among affected populations.
Economist Marvin Banda said from 2022, the debt servicing obligations have been duly burdensome for the fiscal space and has grown astronomically, impacting development expenditure.
“The most important part is to reduce the debt incurrence in the subsequent year. The budgets should also be realistic and less ambitious because these large outlays have not necessarily translated to catalytic multi-sectoral growth,” he said. In the 2024-25 budget, the government had initially planned for a deficit of 7.6 percent of GDP.
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