Minister of Finance and Economic Affairs Simplex Chithyola Banda last Friday has unveiled an ambitious 2025/26 National Budget, amounting K8 trillion, highlighting that the budget is designed to stabilize the economy amid slow Gross Domestic Product (GDP) growth, high inflation, and rising debt.
The government projects an economic rebound with a growth rate of 3.4 percent of GDP, up from the 1.8 percent recorded in previous years. Inflation is expected to moderate from 32.3 percent in 2024 to 24 percent in 2025, driven by tight monetary policy and improvements in maize supply. This positive outlook signals a step towards economic stabilization and recovery.
To achieve these targets, the government has set an ambitious domestic revenue goal of K4.44 trillion, with tax revenue expected to contribute K4.33 trillion. Foreign grants are projected to contribute K1.14 trillion, underscoring Malawi’s continued dependence on external financing. This revenue mobilization is crucial to funding the proposed expenditures and reducing fiscal pressures.
The total expenditure for the 2025/26 financial year is programmed at K8.05 trillion, representing 31.1 percent of GDP. Debt interest payments are projected at K2.17 trillion, consuming 49.2 percent of domestic revenue.
Wages and salaries are projected to increase to K1.53 trillion, including K10 billion for recruitment and K176 billion for general salary adjustments.
In agriculture and irrigation, K693.3 billion has been allocated, with targeted investments in mega farms, maize purchases, and farm input programs. Investments in tourism and mining highlight a strategic shift towards diversifying the economy, with K13.9 billion and K14.2 billion allocated respectively.
The budget reflects a deficit of K2.47 trillion, equivalent to 9.5 percent of GDP. Â The government acknowledges that servicing past debts significantly limits fiscal space for productive investments, reinforcing the need for stringent fiscal discipline and alternative financing mechanisms. This approach is essential to ensure sustainable economic growth and stability.
As Minister of Finance and Economic Affairs Simplex Chithyola-Banda stated, “The government acknowledges that servicing past debts significantly limits fiscal space for productive investments, reinforcing the need for stringent fiscal discipline and alternative financing mechanisms.”
Several key initiatives have been included in the budget to improve economic performance and address fiscal pressures. K100 billion has been allocated to expedite pension payments, reducing waiting times.
Despite revisions, the Affordable Inputs Programme (AIP) remains a substantial commitment at K131.6 billion. In the mining sector, K5.1 billion has been earmarked for the Mining Regulatory Authority, K4 billion for the establishment of the Mining Company, K4.1 billion for Mining and Geological Services, and K1 billion for the Mineral Laboratory.
Look out for the MCCCI comprehensive analysis of the budget in the coming days.
