About K3 trillion of the 2025-26 national budget has already been committed to three major expenditure lines, even before Finance Minister Simplex Chithyola Banda presents the financial plan to Parliament next month.
The committed funds will be directed towards interest on public debt, wages and salaries and pensions and gratuities.
This comes as Chithyola Banda conducted pre-budget consultations with stakeholders on Monday and Tuesday, in Lilongwe and Mzuzu respectively, ahead of the budget presentation expected in February.
According to the 2024- 25 mid-year budget review statement, the government will spend K1.46 trillion on debt interest payments, K1.28 trillion on wages and salaries and K239.92 billion on pensions and gratuities, which includes K46.75 billion for the Government Contributory Pension Scheme.
Malawi Economic Justice Network Executive Director Bertha Phiri said the country faces significant fiscal pressure, with widening budget deficits and declining foreign support.
However, she advocated for increased financing in social sectors and local councils to reduce vulnerabilities at the grassroots level, while calling for fair taxation policies that do not exempt large corporations, especially foreign companies.
“Enhanced domestic resource mobilisation is the only way to ease the pressure, leading to macroeconomic stability.
“The government needs to counter tax avoidance and evasion, because the current taxation system favours wealthy individuals and corporations over small businesses,” Phiri said during the pre-budget consultations.
Phiri added that the government is losing substantial revenue through some foreign direct investments in mining.
“This is largely due to some tax holidays, tax avoidance and tax evasion by foreign investors, while ordinary Malawians face high taxes and the increased cost of doing business.
Malawi is thus being exploited with little or no benefit. Fiscal pressure remains high,” she said.
Economics Association of Malawi president Bertha Bangala Chikadza cautioned against relying on donor funding, citing an 84 percent underperformance in budgeted donor funds for the current fiscal year.
In her presentation during the consultations, Chikadza further challenged the fiscal authorities to start giving equal attention to other high-potential sectors, such as mining and tourism, if the economy is to diversify from agriculture.
“Yes, we are an agriculture-based economy but that may be because we give minimal attention to other sectors that have the potential to overtake agriculture,” Chikadza said.
Chithyola Banda acknowledged the challenges but said the preliminary framework aims to enhance fiscal consolidation while supporting the financial sector.
“Given the current economic climate, it is essential that we collaboratively identify key areas for the budget to focus on in order to promote sustainable economic growth and resilience for the betterment of Malawians.
“The past year has been marked by notable progress and challenges. Domestically, we have worked tirelessly to stabilise inflation, strengthen our currency and improve public service delivery.
“Yet, the country continues to face persistent economic hurdles. Globally, the world is navigating the adverse impacts of geopolitical tensions, fluctuating commodity prices and the negative effects of climate change,” the minister said.
He added that his ministry is still in discussions with the International Monetary Fund regarding the possibility of disbursing resources through the Extended Credit Facility.
“Therefore, the government plans to implement the upcoming budget using available revenue realised from tax and other revenues rather than relying on borrowing,” Chithyola Banda said.
As of June 2024, Malawi’s public debt stood at K15.1 trillion. The 2025- 26 budget must be approved before March 31.
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