Navigating Malawi’s Wage Squeeze: Strategies for Business Resilience Amidst Rising Costs

Key Business Points

• Rising inflation and stagnant wages are expected to make 2025 one of the toughest years for consumers in Malawi, with the cost of living increasing by 27.9% in November.
• Employers and employees are at odds over wage increases, with employers citing productivity and profitability as key factors, while employees argue that wages have not kept pace with the rising cost of living, with the minimum wage currently at K126,000 per month, far below the K1 million required for a family of six to meet their monthly needs.
• New tax measures introduced in the 2025/26 Mid-Year Budget Review, including a increase in the zero Pay As You Earn (Paye) bracket and a rise in Value Added Tax (VAT), are expected to exacerbate the situation for low-income earners, with the Consumers Association of Malawi describing the measures as "poverty-inducing".

The cost of living crisis in Malawi is expected to worsen in 2025, with rising inflation and stagnant wages taking a toll on consumers. The cost of essential items, including food and non-food commodities, has increased significantly, with the Survival Minimum Expenditure Basket (Smeb) standing at K237,500 in October 2025. This has forced households to reduce their spending on critical needs such as healthcare, education, and sanitation, with many zinthu zikukwana (things becoming difficult) for low-income earners.

The minimum wage, currently at K126,000 per month for formal employees and K72,800 for domestic workers, has not kept pace with the rising cost of living, leaving many households struggling to make ends meet. Employers have argued that wage increases must be tied to productivity and profitability, but employees argue that this is not a viable solution given the current economic climate, with tsoka lili pambali (the economy is tough).

The introduction of new tax measures in the 2025/26 Mid-Year Budget Review has been met with criticism from consumers, who argue that the increases will kugwiritsa ntchito (make things difficult) for low-income earners. The Consumers Association of Malawi has described the measures as "poverty-inducing", arguing that they will exacerbate the cost of living crisis. However, the Minister of Finance, Economic Planning and Decentralisation has justified the measures, saying that they are necessary to rebuild the economy and that those with a higher ability to pay should contribute more.

Despite the challenges, there are some positive signs on the horizon. The inflation rate eased in November to 27.9% from 29.1% in October, driven by a drop in food prices. The average retail price of maize, a staple grain, dropped by 6% in November, which could have a positive impact on the cost of living. Kusintha kwa zinthu (things are changing) slowly, and it remains to be seen whether these trends will continue. As the International Labour Organisation has noted, minimum wages should take into account both the needs of workers and their families and economic factors, including the requirements of economic development and levels of productivity. Malawian businesses and entrepreneurs should kuganiza (think carefully) about how to navigate these challenges and opportunities, and kufikira (plan) for the future.

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