Malawi has been ranked as the African country projected to record the largest fiscal deficit in 2026 after the World Bank revised its budget deficit forecast from nine to 11.8 percent of gross domestic product (GDP).
The latest projection, contained in the Africa Economic Update, April 2026—the World Bank’s flagship twice-yearly report on economic trends and fiscal performance in Sub-Saharan Africa—places Malawi ahead of South Sudan, Burundi, Uganda, Mozambique, Zimbabwe, Zambia, Sierra Leone, Ghana and Ethiopia among the 10 African countries expected to post the widest fiscal deficits.
I Nation
According to the report, Botswana and Mauritius are both projected to record deficits of 7.1 percent of GDP, followed closely by Namibia at 6.9 percent and Senegal at 6.7 percent. Uganda is projected at 6.2 percent, while Kenya is expected to post a deficit of 5.6 percent. Sudan, Mozambique and Eswatini are all projected at 5.2 percent, placing them among the lower end of the top ten deficit countries.
The revised forecast is almost unchanged from the 11.9 percent of GDP fiscal deficit recorded in the 2025/26 financial year, suggesting that Malawi’s public finances are expected to remain under severe pressure despite government efforts to narrow the budget gap.
In February, Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamvekha unveiled about K11 trillion national budget anchored on reducing the fiscal deficit, expanding domestic revenue and significantly increasing development spending to stimulate an economy weighed down by high inflation, rising public debt and persistent structural imbalances.
However, the World Bank’s latest assessment suggests the country’s fiscal outlook has worsened since its earlier projections.
The report attributes widening fiscal deficits across many African countries to rising debt-servicing costs, inflationary pressures, weak domestic revenue mobilisation and declining external financing.
Beyond the fiscal outlook, the report argues that while many African countries have adopted industrial policies, including tariffs, tax incentives and special economic zones, the challenge lies in their effectiveness.
According to the report, successful industrial policy depends on sound policy design, strong institutions and effective implementation.
It further observes that many African countries have struggled to replicate the rapid industrialisation achieved by East Asian economies because the conditions that underpinned Asia’s success are largely absent in Africa.
The report notes that East Asia’s industrial transformation benefited from strong state institutions, large domestic markets, substantial fiscal resources and favourable global trade conditions. It argues that rather than attempting to copy that model, African countries need industrial policies tailored to their own economic realities and constraints.
In an interview with SABC News on the report, World Bank chief economist for Africa Andrew Dabalen said external shocks have compounded Africa’s existing structural challenges.
He said before the conflict in the Middle East, the bank had projected Africa’s economy to grow by 4.4 percent.
However, the forecast has since been revised downward to 4.1 percent after the conflict triggered sharp increases in global oil, gas and fertiliser prices.
“We were hoping inflation would remain low, investment would continue to recover and commodity prices would remain high. But the war in the Middle East has led to skyrocketing oil, gas and fertiliser prices that are cascading across many sectors,” said Dabalen.
He said although Africa has demonstrated resilience, many countries continue to grapple with high debt vulnerabilities and limited fiscal space, while those that rely heavily on imported fuel and fertiliser remain particularly exposed to global price shocks.
“A prolonged and destructive conflict could lead to higher inflation and put pressure on governments, threatening the gains many countries have made through fiscal consolidation and economic reforms,” he said.
Commenting on Malawi’s ranking, Economics Association of Malawi president Bertha Bangara-Chikadza said the country’s fiscal challenges extend beyond budget management.
“The economy’s narrow productive base, limited capital investment and rising debt burden have created structural weaknesses that continue to constrain economic transformation.
“With most government revenue already committed to wages, pensions and interest payments, there is very little fiscal space left for development spending that could drive growth,” she said.
Bangara-Chikadza said Malawi’s narrow productive base, limited capital investment and growing debt burden have created structural weaknesses that continue to constrain economic transformation.
She observed that recurrent expenditure—including wages, pensions and domestic interest payments—consumes most of government revenue, leaving little room for development spending.
She said government should prioritise investment in productive sectors such as energy, irrigation and transport infrastructure while promoting higher-value production to strengthen the economy, broaden the tax base and reduce dependence on borrowing.
