Mid-way through the 2024/25 K5.99 trillion National Budget, stark discrepancies have emerged between the government’s projections and actual performance, sparking concerns about the fiscal plan’s implementation going forward.
During Budget Statement presentation on February 23 this year, Minister of Finance and Economic Affairs Simplex Chithyola Banda outlined an optimistic financial plan, forecasting inflation to moderate to 23.4 percent and real gross domestic product (GDP) growth rate to reach 3.2 percent.
Six months after the budget was presented, actual figures reveal a different picture. Inflation has increased to 34.3 percent as of September this year, according to the National Statistical Office, while the Reserve Bank of Malawi has revised downwards the growth forecast to 2.3 percent, citing the impact of El-Nino induced weather volatility.
The International Monetary Fund (IMF) and World Bank are also less optimistic. IMF projects two percent growth rate while the World Bank forecasts 1.5 percent growth rate, indicating possible further economic stagnation.
Treasury officials were not immediately available to comment on how the budget has performed more than six months after it was presented in Parliament.
But economists Bertha Bangara-Chikadza and Velli Nyirongo suggest that while external factors may have influenced the projections, the situation raises questions about government policy and execution effectiveness.
Bangara-Chikadza, who is acting Economics Association of Malawi president, warned that the gap between government projections and economic reality could compromise implementation of the national budget.
“Reliance on external financing and rising debt servicing costs are growing concerns if current economic strains continue,” she said.
To correct the course, Bangara-Chikadza, who teaches economics at University of Malawi, urged government to prioritise efficiency in tax collection, reduce borrowing, stabilise food prices, adjust subsidies and increase spending in high-growth sectors such as tourism.
On his part, Nyirongo, a Scotland-based Malawian economist, cautioned that lower-than-expected GDP growth could lead to reduced tax revenues, forcing the government to increase borrowing to meet its commitments.
He said: “This not only increases public debt, but also raises vulnerability to external shocks and financial instability.
“Rising debt servicing costs strain fiscal resources and could crowd out public investment in critical sectors.”
Nyirongo advised government to realign its spending priorities to ensure that scarce resources are channelled toward high-impact areas.
In the 2024/25 fiscal year, total revenue and grants are estimated at K4.55 trillion, representing 24.3 percent of GDP while domestic revenues are estimated at K3.38 trillion, representing 18.1 percent of GDP.
Out of this, tax revenues are estimated at K3.26 trillion.
In this current budget, the fiscal deficit is estimated at K1.43 trillion, which is 7.6 percent of GDP.
The deficit is expected to be financed through domestic borrowing amounting to K1.28 trillion and K150 billion foreign borrowing.
