Fiscal deficit over shadows surge in revenue—Ecama

Malawi’s Revenue Rise Masks Looming Fiscal Deficit: What It Means for Business and Investment

Post was last updated: September 25, 2025

Key Business Points

  • Fiscal deficit: Malawi’s widening fiscal deficit poses a significant threat to the country’s economic stability, with a K761.8 billion deficit accumulated since the start of the 2025/26 financial year.
  • Revenue growth: While July’s 65 percent rise in government revenue is encouraging, it may be driven by seasonal factors such as tobacco sales, and therefore may not provide a reliable foundation for long-term fiscal stability.
  • Borrowing risks: Financing the deficit through borrowing could have negative effects on the economy, including crowding out private businesses, restricting access to credit, raising interest rates, and fuelling inflation, which can impact mfuko ya akawonio (savings) and chileka cha chipirimu (business growth).

The Economics Association of Malawi (Ecama) has warned that the country’s widening fiscal deficit poses a serious threat to economic stability. According to Reserve Bank of Malawi (RBM) data, the government has accumulated a K761.8 billion deficit since the start of the 2025/26 financial year, with expenditures far outstripping revenues. This has resulted in 32 percent of the K8.07 trillion National Budget being spent within the first quarter of the fiscal year. Ecama president Bertha Bangara-Chikadza cautioned that while July’s reported revenue growth is encouraging, it needs to be understood in context. She emphasized that if the growth is largely seasonal, it cannot serve as a reliable foundation for long-term fiscal stability.

The RBM data shows that total revenues in July rose to K647.4 billion from K392.1 billion in June, driven by a sharp increase in tax revenues and grants. However, non-tax revenues plunged by 77 percent to K24.6 billion during the same period. Expenditures also continued to rise, jumping by 17.3 percent to K740.0 billion, fuelled by recurrent spending as well as development projects. Nthawi ya ulere (times of hardship) may be ahead if the government fails to address the deficit.

Mzuzu University economics lecturer Christopher Mbukwa warned that financing these gaps through borrowing could have ripple effects on the economy. He cautioned that an expanding deficit complicates efforts to maintain sustainable debt levels, and that overreliance on borrowing risks crowding out private businesses, restricting access to credit, raising interest rates, and fuelling inflation. This could impact biashara (businesses) and vikuku (investments) in the country. Mbukwa emphasized that the persistent deficits are a cause for concern, and that Malawi risks sliding deeper into a cycle of borrowing that undermines growth prospects.

Government officials have defended their fiscal stance, pointing to rising development expenditure in infrastructure, agriculture, and human capital as a sign of commitment to long-term growth. The Ministry of Finance and Economic Affairs argued that such investments, though costly, are necessary to unlock productivity and advance the goals of Malawi 2063, the country’s long-term plan. As Malawi enters the next phase of the financial year, the challenge for policymakers will be to convert temporary revenue surges into lasting fiscal resilience. For ordinary Malawians, the stakes are immediately felt in borrowing costs, the affordability of goods, and the pace of job creation. The government must prioritize fiscal consolidation measures to avoid undermining growth prospects and ensure a stable economy for ma entrepreneur (entrepreneurs) to thrive.

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Vanessa Banda
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