Minister of Finance Simplex Chithyola Banda Friday presented an K8.05 trillion 2025-2026 national budget that is weighed down by statutory obligations such as debt interest repayment, salaries and wages and pensions and gratuities.
Combined, these eat up a whopping K3.87 trillion, which is 48 percent of the total financial plan.
Of the total budget, recurrent expenses are estimated at K6.04 trillion while development expenditure is estimated at K2.01 trillion.
The budget has a shortfall of K2.47 trillion.
Chithyola Banda told lawmakers that he intends to finance the budget deficit through a K2.32 trillion domestic borrowing and a K145.78 billion foreign borrowing.
Among others, the budget, which he described as production budget, has assumed that authorities will raise K5.58 trillion in both domestic revenue and grants.
As is the case with recent budgets, interest repayment has taken the lion’s share of the budget at K2.17 trillion which is 8.4 percent of GDP and 49.2 percent of domestic revenues.
Of the total public debt interest, foreign debt interest is estimated at K61.2 billion while interest for domestic debt is estimated at K2.11 trillion.
Chithyola Banda said government plans to stimulate economic growth through job creation, reduced dependence on imports and increased export opportunities.
To this effect, government has allocated substantial resources to a number of sectors including agriculture, irrigation, tourism, mining and trade. [See sidebar for allocations].
To mitigate the debt interest burden, government is focusing on production to enhance domestic revenue collection, he said.
“This is coupled with the implementation of the Domestic Revenue Mobilisation Strategy that is expected to broaden the tax base; improve tax compliance, strengthen the capacity for revenue mobilisation and improve non tax revenue collection,” Chithyola Banda said.
In specific allocation, education and skills development has received the highest funding at K1.3 trillion.
The second highest allocation is for health and population sector with a total budget of K741.05 billion.
Agriculture sector ranks third with an allocation of K693.3 billion. This comprises K131.6 billion for Affordable Input Programme (AIP); K99.5 billion for irrigation development; K70 billion for Farm Input Loan Program administered by Neef; K60 billion for maize purchases; K53.1 billion for Admarc recapitalisation; and K38.3 billion for mega farms.
The budget has also made a provision of K10 billion for recruitment and K176 billion for general salary increment.
Among the winners in the budget are people who consume bread and second hand clothes as the budget has removed VAT on the commodities.
Government has also raised the monthly stipend for graduate interns from K80,000 to K150,000 and has allocated K2 billion to recapitalize the Youth Innovation Fund to support young entrepreneurs and innovators.
Chithyola Banda has also allocated K162.9 billion to the Malawi Electoral Commission (Mec) to enable it manage the September 16 elections.
“These resources are specifically for polling and all the remaining activities in the electoral process. The allocation represents an increase of 207 percent from the 2024-25 revised provision of K53.1 billion,” he said.
Director General for National Planning Commission (NPC) Thomas Munthali said while there can never be a perfect budget, this financial plan shows significant efforts in aligning to the Malawi 2063.
It also focuses on the productive sectors of agriculture, tourism, mining and manufacturing so that Malawi can create wealth to fund her development primarily aspirations.
“The reality is that increasing the fiscal space, ensuring price stabilisation, having abundance of forex and dealing with the unsustainable debt, will require a nation that is producing more and not relying on begging or borrowing.
“We need a private sector that is enabled and a state that intervenes through a developmental state philosophy where market failures exist,” he said.
He further that said although the strategies for promoting manufacturing did not come out clearly, it is worthy applauding that the authorities are focusing on the sector.
“The budget allocations to the mining and tourism sectors may not be that much nominally [but] increasing allocation to them by 160 percent and 192 percent respectively sends a good signal that government is committed to supporting those sectors,” he said.
Executive Director for Malawi Local Government Association (Málga) Executive Director Hadrod Mkandawire described the budget as ambitious but fell short on local government requirements.
“As local government sector, we regret that the meaningful fiscal devolution continues to drag,” he said.
He added: “Much as we were excited by the minister’s posture in his preamble when presenting the Local Government Authorities’ budget, where he re-emphasised that it’s the government’s policy to strengthen fiscal devolution, we have noted a glaring mismatch with the actual budget allocations to Local Government Authorities.
“For instance, while the national budget allocation for development is at K2 trillion, only K140.5 billion has been allocated to Local Government Authorities for development, representing only seven percent of the national development estimates.”
Health rights activist, Maziko Matemba said the budget has revised backwards the health budget to 9.4 percent amidst uncertainty in the global health financing by major donor countries.
This, he said, needs a serious look in the Committee of Supply.
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