Daddy has been borrowing heavily. Creditors, including loan sharks, keep coming home looking for their money. Helplessly, he sometimes instructs his wife and children to tell the creditors he is not home yet he is holed up in the bedroom.
In the circumstances, the family constantly lacks food, some of the children do not go to school due to lack of fees and there is no money to meet medical bills. While most of their neighbours own the homes they live in, his family is renting and six months behind in rental payments.
Where does the money daddy borrows go? The first suspicion is that he is living a double life and probably has a second family somewhere.
Given the man’s sweet tooth for high life he can hardly afford, that is probably a plausible explanation. But, as The Nation has discovered, that is just a fraction of the truth.
Apparently, the man, a Mr. Malawi Government, has been borrowing largely to pay off loans contracted over the past decade, mostly interests on principal in a vicious cycle that has left his finances stressed up all the time and his family in perpetual deprivation.
This is not just a fireside chat.
It is the reality of the indebtedness the Malawi Government is in: Debt financed consumption for survival—borrow to pay some of the most pressing loans falling due, ensure civil servants get their wages and salaries; bring in fuel, fertiliser and so-called strategic imports, which are consumptive while long-term infrastructure that is actually the catalyst for growth and a way to wiggle out of the debt trap, get crumbs.
Malawi’s total public debt stock now stands at K22.4 trillion or 89 percent of its gross domestic product (GDP) from K4.76 trillion or 54 percent of GDP in 2020 amid rising deficits.
In the current financial year ending March 31 2026, the deficit is projected at 9.5 percent of GDP primarily financed by domestic borrowing.
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The debt-to-GDP ratio surged from 54 percent in 2020 to around 73 percent in 2022, roughly 82 percent in 2023 and hovered around 89 percent from 2024/25.
Treasury data show that between 2020 and 2025, the bulk of the borrowed money has been spent on recurrent expenditures such as debt servicing and salaries rather than developmental or capital spending.
In the 2025/26 National Budget, just 10 percent of total expenditure went to capital formation and other operations with wages and debt servicing swallowing 90 percent of the budget, thereby squeezing capital expenditure and limiting government’s ability to finance long-term growth.
In the past five years, borrowing has steadily moved away from expanding development capacity towards financing widening fiscal gaps.
Debt repayments alone have surged from roughly K300 billion in 2021/22 to a projected K2.47 trillion in 2025/26, an eightfold increase that now consumes an increasingly large share of government revenue and total expenditure.
The trend points to a structural transition: Malawi is borrowing less to build and more to survive.
How the debt stock evolved
Ministry of Finance, Economic Planning and Decentralisation data show that prior to 2020, public debt stood at 54 percent of GDP.
But since 2021, a combination of persistent fiscal deficits, exchange-rate devaluations, arrears recognition and weak economic growth pushed the ratio to around 89 percent of GDP.
In nominal terms, the debt stock has ballooned by K16.8 trillion or 60 percent of GDP to K24.4 trillion. Part of that increase reflects new borrowing while the other part is pure arithmetic.
Two major devaluations since 2022 inflated the kwacha value of external debt, even where dollar-denominated obligations remained unchanged.
“If you had about K3 trillion in debt, a cumulative devaluation of around 70 percent is not small,” said a former secretary to the Treasury (ST), referring to the 25 percent devaluation in May 2022 and the 44 percent one in November 2023.
The former ST, who served during part of the period under review, confided that Malawi’s debt story is also shaped by how liabilities were formalised.
“When government inherited unpaid suppliers, those suppliers began to demand payment or threaten court action,” he said.
Domestic debt now dominates
Debt composition has shifted markedly. Between 2021/22 and 2025/26 fiscal years, 80 to 94 percent of annual fiscal deficits were financed through domestic borrowing. In 2025/26 alone, domestic borrowing is projected at K2.33 trillion, more than 90 percent of the deficit.
Heavy reliance on domestic borrowing exposes government to short maturities and higher interest rates. Externally, foreign currency obligations create exchange-rate risk.
Economics Association of Malawi president Bertha Bangara-Chikadza observed that exchange rate movements have inflated the kwacha value of external debt.
“Clearance of previous liabilities also raises debt levels, reflecting past fiscal slippages,” she said.
Borrowing outpaces development
The clearest signal of the fiscal shift lies in expenditure patterns.
In 2024/25, government borrowed K1.59 trillion domestically while actual development expenditure amounted to just K314 billion. Borrowing was roughly five times higher than capital investment that year.
Bangara-Chikadza, who teaches economics at the University of Malawi, said persistent deficits lie at the core of the problem.
“Malawi’s rising public debt has been driven largely by persistent fiscal deficits, mainly due to low revenues and high recurrent expenditures, particularly on wages, subsidies and interest payments,” she said.
Growth constraints and climate shocks compounded the pressure, limiting revenue performance while increasing spending needs.
Debt service crowding out
As the debt stock expanded, so did repayments. Debt servicing is now approaching K2.5 trillion annually, rivalling or exceeding major sector allocations in several budget cycles.
Development investment consultant Fussein Dauda warns that rising repayments must translate into measurable productivity gains.
“If debt service rises without reducing poverty, it signals expanded vulnerability, not progress,” he said.
Revenue pressure and investor risk
With repayments absorbing more fiscal space, attention has turned to domestic revenue mobilisation.
However, tax expert Misheck Msiska cautions that aggressive enforcement offers only temporary relief.
“The introduction of further taxes and increase in tax rates will avail some gains in the short-term, but not sustainable,” he said.
The former ST echoed the need for revenue reform, saying: “Let every Malawian pay their fair share of taxes.”
Where do we go from here?
The debt stock has expanded rapidly. Domestic borrowing dominates deficit financing.
Bangara-Chikadza says the way forward requires fiscal discipline and prioritisation of productive investment.
“Productive investments must be prioritised to ensure that the country gets on the path to grow out of debt rather than borrowing to survive,” she said.
Institutional reform and strategic investment choices will determine whether debt becomes a platform for transformation or a burden on future budgets. That is the headache Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamvekha will have as he presents the 2026/27 National Budget in Parliament on February 27.
