Revitalizing Malawi’s Economy: A New Era of Opportunity for Business Growth and Investment

Key Business Points

• Malawi’s 2025/26 Mid-Term Budget Review Statement has sparked heated debate in Parliament, with opposition leaders criticizing the government’s new tax measures as a threat to economic recovery and household welfare.
• Tax increases and levies, such as the rise in Value Added Tax from 16.5% to 17.5% and a 0.05% levy on bank and mobile transfers, may push prices of basic goods beyond the reach of struggling families and punish villagers receiving remittances.
• Fiscal discipline and growth-driven revenue approaches are being urged by experts, including former Finance Minister Sosten Gwengwe, to avoid choking households, suffocating business activity, and undermining long-term economic growth.

The debate surrounding Malawi’s 2025/26 Mid-Term Budget Review Statement has highlighted concerns among business leaders and politicians about the potential impact of new tax measures on the economy and household welfare. Opposition spokesperson on Finance Eisenhower Mkaka delivered a scathing critique of the revised fiscal plan, arguing that it risks deepening the hardship already faced by millions of Malawians battling spiralling inflation and falling purchasing power. Mkaka cautioned that the decision to raise the Value Added Tax will push the price of basics beyond the reach of struggling families, particularly in rural areas such as Masambanjati and Nkhamenya.

The introduction of a 0.05% levy on bank and mobile transfers has also been criticized as a "tax on the movement of money itself" that punishes villagers receiving remittances, small traders going cashless, and the unbanked seeking financial inclusion. Mkaka urged the administration to pursue a growth-driven revenue approach centered on production, digitized tax systems, and reduced leakages rather than scraping pennies from the pockets of the destitute. This approach, he argued, would help to "choke households, suffocate business activity, and bring the economy to its knees" if not addressed.

In a sober and technocratic counterpoint, former Finance Minister Sosten Gwengwe emphasized the need for fiscal discipline in the face of Malawi’s tight fiscal space. He noted that recurrent expenditure has surged to 77.6% of the budget, while development spending has been revised downwards, despite the nation’s urgent need for infrastructure, export-oriented investment, and long-term growth drivers. Gwengwe advised that government must avoid expanding welfare commitments when the fiscus "cannot sustainably finance" such ambitions, warning that domestic borrowing is crowding out the private sector, pushing up interest rates, and escalating inflation risks. The committees recommended a comprehensive VAT reform, strengthened rental income tax enforcement through a national digital addressing system, and a more aggressive export-diversification agenda to drive economic growth and stability.

As Malawi’s business community navigates these challenges, it is essential to consider the potential implications of the new tax measures on ndalama zathu (our money) and the overall mipango ya ufndi (financial planning) of households and businesses. By prioritizing fiscal discipline, growth-driven revenue approaches, and export diversification, Malawi can work towards creating a more stable and prosperous economy that benefits all citizens, from abale (farmers) to wafanyabiashara (business owners).

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