Funding, capacity strain local councils—treasury

Council Funding Gaps Threaten Local Business Growth, Treasury Warns

Post was last updated: November 3, 2026

Key Business Points

  • Financial capacity gap – Local councils are still heavily dependent on central government funding despite taking on new responsibilities, and many lack the staff and resources to deliver essential services.
  • Revenue potential untapped – Councils have opportunities to raise additional income locally, but they lack the capacity and systems to exploit these prospects.
  • Need for equitable, timely funding – Effective decentralisation requires matching responsibilities with adequate, fairly allocated resources and better cash‑management practices.

Malawi’s decentralisation drive is hitting a critical juncture as the Ministry of Finance, Economic Planning and Decentralisation acknowledges that district and city councils cannot yet fulfil their expanded roles. Speaking at the Economics Association of Malawi (Ecama) 2026 Annual Economic Conference in Mangochi, Kate Langwe, the ministry’s director for poverty reduction and social protection, said councils are “equipped, but not well equipped” to implement reforms.

The core issue is a funding shortfall. According to a United Nations Common Country Analysis, a 2025 UNICEF costing study identified a 78 percent financing gap for devolved social‑sector and agricultural functions. District councils receive only about a fifth to a quarter of the funds needed, with roughly 80 percent of their budgets coming from central transfers. This gap is compounded by delayed disbursements. In May, the Malawi Local Government Association (Malga) reported that authorities went two months without funds for Other Recurrent Transactions and the Constituency Development Fund, leading to paralysis in services such as hospital fuel, water and electricity payments.

Staff shortages and incomplete devolution further weaken implementation. While many councils have the potential to generate additional revenue locally, they lack the technical know‑how and systems to capture these opportunities. The transfer of responsibilities has not been matched with decision‑making authority, leaving councils struggling to act swiftly.

Chisomo Tsonga, a public financial management specialist with UNICEF, stressed the importance of equitable resource allocation. She urged the government to “focus on introducing equity in terms of how resources are allocated, using data, looking at poverty disparities and vulnerabilities.” Better cash management and timely disbursement were highlighted as essential for strengthening project execution.

A United Nations Development Programme presentation at the conference questioned whether public institutions have sufficient financing, capacity and accountability mechanisms to turn policy into measurable results. The emphasis was on improving the utilisation of existing resources rather than solely mobilising new funds.

Langwe acknowledged weaknesses in financial management and coordination between central government, district councils and development partners. She warned that fragmented financing and duplication of activities can undermine development outcomes, especially where resources are already limited. She called for further reforms to align financial resources with the responsibilities now assigned to councils.

The two‑day lakeshore conference, themed “From policy to practice: Making reforms work,” left business owners and entrepreneurs with a clear message: address the capacity gap, unlock local revenue potential and ensure fair, timely funding to turn decentralisation into a catalyst for economic growth. Malawi’s entrepreneurs can now explore partnerships with local councils as they seek to expand market (nsanja) activities and improve service delivery for consumers.

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Vanessa Banda
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