The Malawi Government overshot its borrowing target by 100 percent in July, with Treasury securing K523.58 billion through Treasury bills (T-bills) and Treasury notes (T-notes), far exceeding the planned K263.63 billion, data show.
Economic analysts have since described the development as risky, saying it will likely balloon the budget deficit projected at K2.47 trillion in the current fiscal year.
The fiscal plan has already recorded a deficit of K669 billion in the first quarter of this fiscal year that runs between April and June 2025, data show.
Highlighted in Nico Asset Managers Monthly Economic Report for July, the government planned to borrow K84.96 billion through T-bills and K178.67 billion through T-notes in July.
In the end, Treasury ended up borrowing K173.54 billion via T-bills, which is 104.2 percent above the forecast and K350.04 billion through T-notes, representing a 95.9 percent increase over the planned target.
Reads part of the report: “This divergence reflects a stronger than anticipated demand for government securities and signals an expansion in fiscal financing beyond initially budgeted levels.
“The development indicated a deviation from the original fiscal framework, underscoring an expansion in government borrowing requirements during the period.”
The investment advisory firm said the trend signalled underlying pressures in fiscal management driven by increased expenditure obligations or revenue shortfalls.
Nico Asset Managers has since expressed fear that government faces threats to its target of reducing the fiscal deficit as the balance is likely to increase in the short to medium-term, putting further upward pressure on interest rates due to increased borrowing to finance the budget.
In an interview yesterday, Malawi Economic Justice Network (Mejn) executive director Bertha Phiri said excessive borrowing is bound to suffocate the economy, which is risky at a time debt levels are already unsustainable.
She said: “Malawi needs the dismantling of such a debt acquaintance system, policies demand fiscal prudence. The annual borrowing plan is one such affirmative legal framework.
“This excessive borrowing is risking Malawi and suffocating the economy even more. It is risky because what it means is that we are mortgaging Malawi and its economy more and more.”
Economics Association of Malawi president Bertha Bangara-Chikadza yesterday said the continued budget deficit is a concern, saying government’s fiscal pressure mainly heightens in the coming quarters of the economic lean period.
“It would be reasonable to expect that the quarterly deficit should have been lower if the government was to achieve the planned deficit for the year,” she said, adding that the current situation underscores the challenges the government is facing to fulfil its mandate effectively.
This is happening at a time the K8.05 trillion 2025/26 National Budget has recorded a K669.3 billion deficit in the first quarter of this fiscal year, igniting fears that the planned K2.47 trillion annual deficit could rise further.
The quarterly fiscal balance is 80 percent more than the K371 billion recorded in the corresponding period last year, which economists fear will likely rise in the subsequent quarters because of election-related spending, among others.
Reserve Bank of Malawi data contained in the Monthly Economic Review for June 2025 show that total revenues for the quarter stood at K1.17 trillion while expenditures were recorded at K1.84 trillion, creating a K669 billion deficit.
The central bank attributed the rise in the budget deficit to the decline in both tax and non-tax revenues and some expenditure pressure which intensified in May.
Between April and June, tax revenues were recorded at K794.8 billion as the Malawi Revenue Authority collected K315.5 billion in April, K260.7 billion in May and K218.6 billion in June, according to the report.
Ministry of Finance spokesperson Williams Banda acknowledged that revenue collection and expenditure remained a challenge due to the narrow tax base.
This fiscal year, government is expected to close with a fiscal deficit of K2.47 trillion or 9.5 percent of gross domestic product , which will be primarily financed through domestic borrowing amounting to K2.33 trillion and foreign borrowing of K145.78 billion.
In the previous financial year, the overall deficit was recorded at K1.79 trillion, representing 9.6 percent of the country’s GDP.
