The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) says addressing the fiscal deficit is a crucial step toward achieving economic recovery and stability.
In its 2024 Assessment of the Business Environment, MCCCI said one effective approach is to formulate a budget that aligns closely with actual revenue collection, thereby minimising reliance on borrowing to finance expenditures.
Reads the assessment in part: “By narrowing the fiscal deficit, the government can reduce its dependence on domestic borrowing, which often crowds out the private sector’s access to credit.
“This would create more opportunities for private businesses to obtain affordable financing, enabling them to invest, expand, and drive economic growth.”
The chamber adds that reducing the fiscal deficit would also ease inflationary pressures, as excessive government borrowing can lead to an oversupply of money in the economy, driving up prices.
Treasury data shows that in the first half of the 2024/25 financial year, a combination of lower-than-expected revenue and sustained spending resulted in a fiscal deficit of K950.9 billion, surpassing the projected K897.2 billion.
The deficit was financed through net domestic borrowing of K908.2 billion and foreign borrowing of K42.8 billion.
In the full-year, fiscal deficit is expected to narrow from K1.45 trillion, to K1.4 trillion.
Earlier, economist Bond Mtembezeka, who is Business Partners International country manager, advised government to revisit its expenditure lines and introduce measures to boost revenues in the second half to keep within budgetary targets.
Said Mtembezeka: “In the later part of the year, such expenditure usually accelerates. It’s not surprising that the revenues are lower than expected as economic growth is slower than projected and Malawi Revenue Authority has missed a few targets.”
In his 2025/26 Pre-Budget Consultation with stakeholders in Lilongwe, Minister of Finance and Economic Affairs Simplex Chithyola-Banda pledged reforms to address gaps in the forthcoming budget.
He said: “We have been working on innovative strategies to raise funds and plug the gaps in the budget.
“We have been exploring carbon markets, and we can generate resources from that to fund activities in critical sectors.”
