The K8.05 trillion 2025/26 National Budget has recorded a K669.3 billion deficit in the first quarter (Q1) of this fiscal year, igniting fears that the planned K2.47 trillion annual deficit could rise.
The fiscal balance is 80 percent more than 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 (RBM) data contained in the Monthly Economic Review for June 2025 show that total revenues for the quarter from April 1 to June 30 stood at K1.17 trillion while expenditures were recorded at K1.84 trillion, creating a K669 billion deficit.
The report further indicates that the budget deficit for April, the first month of this fiscal year, stood at K130.4 billion. It then went up to K300 billion in May and thereafter dropped to K238.9 billion in June.
RBM has 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.
Reads the report in part: “Revenues decreased by K86.7 billion to K348.4 billion in May 2025 from K435.1 billion in the preceding month.
“The outturn was driven by decreases in tax revenues, non-tax revenues and grant collections by K54.8 billion, K23.6 billion and K8.3 billion to K260.7 billion, K29.5 billion and K58.2 billion, respectively.”
The report further said government expenditures increased by K82.8 billion to K648.4 billion in May 2025 on account of increases in recurrent and other expenditures while development expenditure decreased by K11.2 billion to K112.1 billion in the reviewed month.
During the quarter, 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.
Commenting on the revenue performance, Economics Association of Malawi acting president Bertha Bangara-Chikadza described the quarterly deficit as 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.
Bangara-Chikadza said the current situation underscores the challenges government is facing to fulfil its mandate effectively.
Centre for Social Concern economic governance officer Agnes Nyirongo said the reduction in development expenditure threatens to derail long-term poverty reduction efforts.
“If we continue increasing recurrent costs, largely salaries and administrative overheads while cutting investments in health, education and infrastructure, we are simply locking ourselves into a low-growth, high-inequality future,” she said.
Economic statistician Alick Nyasulu cautioned that rising government deficits coupled with the foreign aid and debt squeeze, will force the government to borrow more from the domestic market.
He warned that this would worsen the crowding out effect, a situation where the private sector cannot access loans from commercial banks.
Minister of Finance and Economic Affairs Simplex Chithyola Banda projected that the government will close the 2025/26 financial year with a fiscal deficit of K2.47 trillion or 9.5 percent of the gross domestic product (GDP), 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.
