Revitalizing Malawi’s Economy: Harnessing Budget Savings for Business Growth

Key Business Points

• Expenditure reforms can save Malawi between 2.7 and 4.5 percent of GDP, according to the World Bank, by implementing wage bill controls, procurement reforms, and travel rationalisation.
• E-procurement can yield significant savings, between 0.83 and 1.38 percent of GDP, by improving transparency and reducing opportunities for corruption, and businesses can benefit from digitizing their procurement processes to improve efficiency and reduce costs.
• Cash budgeting can help minimize the gap between revenue and expenditure requirements, and businesses can adopt similar approaches to manage their finances effectively, using "mphatso ya chitukuko" (cost-cutting measures) to reduce unnecessary expenses.

The World Bank’s Malawi Public Finance Review 2025 highlights the need for decisive action to stabilize public finances and address the country’s widening fiscal imbalances. With a budget deficit projected at K3.1 trillion and inflation at 29.1 percent, the report emphasizes the importance of expenditure reforms to generate substantial fiscal space without undermining frontline service delivery. The bank argues that targeted rationalisation of the wage bill, procurement systems, and travel allowances can yield significant savings, and businesses can learn from these "zinthu zofunika" (prioritization strategies) to optimize their own operations.

The report notes that Malawi’s expenditure structure has grown increasingly rigid, with the wage bill, allowances, and poorly prioritized development projects consuming a rising share of the budget. Procurement reforms, in particular, offer significant opportunities for savings, with the potential to yield between 0.83 and 1.38 percent of GDP. By transitioning to e-procurement, businesses and government can improve transparency, reduce opportunities for "rent-seeking" (corrupt practices), and ensure better value for money. Additionally, travel and allowances can be reduced by reinstating cost-containment measures, such as those used in 2013, to save between 0.27 and 0.45 percent of GDP.

Economics Association of Malawi president Bertha Bangara-Chikadza emphasizes the need for discipline in allocating resources, highlighting the importance of the Integrated Finance Management and Information System (Ifmis) in tracking expenditures and reducing waste. World Bank senior economist Jakob Engel warns that without a decisive shift in direction, Malawi risks falling off the map, emphasizing the need for policymakers to confront the scale of the challenge. The World Bank’s recommendations mirror the austerity measures announced by Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamvekha, including tighter travel restrictions, reduced fuel allocations for senior officials, and a freeze on recruitment and promotions. By adopting these measures, businesses can also improve their own financial management and "kujifunza kwa ife" (learn from experience) to achieve long-term sustainability.

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