Navigating Malawi’s Fiscal Crossroads: Strategies for Business Resilience Amidst Rising Debt

Key Business Points

• Fiscal discipline is crucial for Malawi’s economic growth, as the country’s expenditure continues to outpace revenue, leading to a widening financing gap and increasing public debt.
• Uncontrolled expenditure is a major challenge, fueled by unplanned spending and statutory obligations, which limits revenue mobilization and entrenches deficits, making it essential for the government to prioritize spending and cut unnecessary expenses.
• Economic recovery measures are needed to stimulate growth, including widening the tax base, generating foreign exchange, and strengthening reserves to improve the balance of payments, which can be achieved through collective efforts from the government, private sector, and other stakeholders, as emphasized by the Chichewa phrase "Umodzi ku mphawa, udzadze mpango" meaning "Unity is strength, let’s work together".

Malawi’s fiscal position continues to deteriorate despite ongoing public finance management reforms, with government expenditure rising faster than revenue and widening the financing gap. According to the African Development Bank (AfDB)’s latest Country Focus Report, domestic revenue grew from 14.7 percent of gross domestic product (GDP) in 2022 to 18.1 percent in 2024, while expenditure surged from 26.8 percent to 32 percent of GDP over the same period. This imbalance has pushed public debt to K22.4 trillion, underscoring mounting fiscal pressure. The situation has been worsened by declining external support, with external financing accounting for 25.7 percent of total revenue in 2025, down from 26.3 percent in 2024, leaving the government increasingly reliant on domestic borrowing.

Economics Association of Malawi (Ecama) President Berthe Bangara Chikadza faulted unchecked expenditure, stating that borrowing had reached unsustainable levels, thereby undermining efforts to stabilize the economy. She emphasized the need for tighter expenditure controls, but noted that statutory obligations such as salaries and utility bills consumed a large share of the budget, leaving little room for cuts. Unplanned spending, triggered by shocks such as weather-related disasters, further complicates fiscal management. Chikadza highlighted a disconnect between actual spending and priority growth sectors, saying this imbalance limits revenue mobilization and entrenches deficits. She called for fiscal consolidation anchored in discipline, emphasizing that "kugwira ntchito ndi kusintha" or "working together is key to change".

Reserve Bank of Malawi figures show that, in November 2025, central government revenue stood at K422.1 billion against expenditures of K498.5 billion, resulting in a deficit of K76.4 billion. Meanwhile, Finance Minister Joseph Mwanamvekha has hinted that, in the 2026-27 fiscal plan, the Treasury is expected to balance consolidation with measures to stimulate economic recovery. Mwanamvekha emphasized the need to control expenditure, widen the tax base, and generate more foreign exchange to strengthen reserves and improve the balance of payments, highlighting the importance of collective solutions to address these challenges, as reflected in the Chichewa phrase "tisangalale" or "let’s work together".

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