Economists and groups have urged Malawi’s 2026/27 Budget to be realistic, control spending, and focus on key social programmes, warning that wishful thinking could keep the economy weak.
The calls were made yesterday in Lilongwe during the 2026/27 pre-budget consultations convened by the Ministry of Finance, Economic Planning and Decentralisation, where stakeholders challenged Treasury to align policy ambition with fiscal realities.
According to projections presented at the meeting, economic growth in 2026 is expected at about 2.7 percent, reflecting a modest recovery amid tight monetary conditions, high domestic debt and lingering food-supply pressures. Inflation is projected to remain elevated in the near term, while interest rates are expected to stay restrictive as government borrowing continues to crowd out private-sector credit.
The Economics Association of Malawi (Ecama) president Bertha Bangara-Chikadza said the outlook underlines the need for discipline rather than populism.
The Ecama head cautioned that repeated recapitalisation of loss-making State-Owned Enterprises (SOEs) without performance reform merely shifts pressure onto public debt.
“Recapitalising SOEs that continue to make losses is like capitalising losses,” she said, adding that reforms must focus on governance, pricing and efficiency.
She called for phased, cost-reflective tariff adjustments for utilities—paired with targeted support for vulnerable households—to stabilise service providers without fuelling inflation.
Bangara-Chikadza, who also teaches economics at the University of Malawi, urged Treasury to modernise the tax system by broadening the base rather than increasing rates, citing property taxation, digital economy levies and stronger enforcement as areas with potential.
The civil society echoed those concerns. The Malawi Economic Justice Network (Mejn), represented by its executive director Bertha Phiri, questioned the credibility of macroeconomic assumptions used in recent budgets. Phiri said repeated gaps between projections and outcomes—especially on revenue—have undermined fiscal planning.
She pointed to rigid expenditures, rising debt service costs and heavy reliance on high-interest Treasury instruments as key constraints on fiscal space.
“Public debt continues to grow, while domestic borrowing overshoots projections,” Phiri said, urging stronger expenditure controls, accelerated project implementation and closer alignment of the budget with Malawi 2063 priorities.
Mejn also pressed government to protect social sector spending, noting that under-execution in areas such as social protection and service delivery risks deepening inequality and weakening resilience to climate shocks.
Lilongwe University of Agriculture and Natural Resources (Luanar) representative Kennedy Machira said the growth projections for 2026 would remain fragile without deeper reforms in agriculture, which continues to anchor inflation, exports and employment.
He argued that food inflation remains the biggest macroeconomic risk and said a shift toward a private-sector-led agricultural model is necessary to stabilise prices and create jobs.
“We need to move away from business as usual in agriculture,” Machira said. “Graduates should not be absorbed only into academia or informal work. They must be deliberately attached to the private sector so they acquire productive, market-relevant skills.”
Machira proposed a dedicated budget line to support private-sector placements for agriculture graduates, arguing that structured attachments would improve productivity, raise earning potential and reduce graduate unemployment.
He also called for stronger export orientation through commercial farming, mineral value chains and government-to-government market arrangements to support foreign exchange generation.
Without such reforms, he warned, Malawi risks continued dependence on imports, volatile food prices and limited job creation—undermining the growth targets outlined for 2026 and beyond.
Responding to the submissions, Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamvekha acknowledged the difficult trade-offs facing policymakers and cautioned against expectations of painless reform.
“The economy will recover in the next few years,” Mwanamvekha said. “But we have to be ready to swallow the bitter pill of economic reforms.”
He said the forthcoming 2026/27 Budget will prioritise macroeconomic stabilisation, food security and protection of critical social services, even as Treasury tightens controls to rein in deficits.
