Pressure is mounting for Treasury to increase health funding after it emerged that allocation to the drug budget is less than half of what is required, yet a major donor has just pulled the plug on it.
But even as the Parliamentary Cluster Committee on Health urged Treasury this week to cover a K75 billion drug funding gap for the Ministry of Health, there is little capacity to increase money from public resources, leaving the poor in jeopardy.
Government’s own National Health Financing Strategy (2023-2030) says as much, stressing that the only way to stretch any macro-fiscal space to accommodate extra spending on healthcare is to implement a radical reconfiguration of sectoral shares of the budget in favour of health, a daunting balancing act amid competing priorities made even tougher in an election year.
In its report following scrutiny of the proposed 2025/26 National Budget, the parliamentary committee observed that despite the health sector funding increasing this year, it is concerned with the 55 percent deficit in the drugs budget.
In an interview, committee chairperson Mathews Ngwale said the Ministry of Health’s quantification of the medicines and laboratory items for the 2025/26 financial year is K138 billion, but government has allocated just K63 billion, leaving a deficit of K75 billion.
He said besides the drug allocation shortfall, central and districts hospitals currently owe Central Medical Stores Trust (CMST) about K11 billion and K30 billion, respectively.
Said Ngwale: “DHOs [district health offices] should receive adequate drug budgets to avoid incapacitating the operations of CMST and government must settle the accrued arrears to allow CMST to [re-capitalise] on its supplies.”
He observed that the recent withdrawal of United States Agency for International Development’s (USAid) support to Malawi and the threat of other donors following suit, should jolt government to seriously strategise on funding for the health sector, as the aid cuts will affect the availability of drugs and other health services.
Donors—who for decades have funded more than half of Malawi’s healthcare—are fleeing the sector, with the US withdrawing early this month when Washington terminated contracts worth $230.4 million (nearly K400 billion) under USAid as part of President Donald Trump’s “America First” foreign policy doctrine.
The health sector is the most affected by the dismantling of USAid in Malawi as just one area of HIV and Aids has lost $163 521 653 (about K283.5 billion), according to information in a termination note of March 3 2025.
Other Western donors have also progressively been slashing aid to poor countries.
Early this month, the United Kingdom announced that it would cut its foreign aid from 0.5 percent of gross national product to 0.3 percent to free up money for defence spending amid growing threats from Russia and collapsing security guarantees from the US.Ngwale:
Across Europe, France and Germany have in recent years, also gradually scaled back foreign assistance, hurting budgets of poor countries such as Malawi, especially in the health sector.
At its peak in 2011/2012, donors used to account for more than 60 percent of Malawi’s health budget, but that has now slumped to around 55 percent, which still puts Malawi among the highest donor-dependent countries globally when it comes to health financing, against an average of 27 percent for its peer nations.
While Malawi Government’s contribution to its health funding has improved from around 18 percent to 24 percent within the same period, the pace is too slow to compensate for the falling foreign aid.
In the proposed 2025/26 budget, the Malawi Government intends to allocate K741.05 billion to the sector, up from K729.47 billion in the previous financial year.
The proposed allocation represents 9.2 percent of the national budget pegged at K8 trillion, a financing level that falls short of the Abuja Declaration on Health.
The Abuja Declaration, adopted by the African Union in April 2001, stipulates that African countries who are signatories to the pact, should allocate 15 percent of the total budget to the health sector to improve healthcare access.
Malawi’s proposed new fiscal plan, on the other hand, did not explicitly mention interventions on how the Malawi Government will fill the funding gap to health left by USAid, for example.
But with Malawi Government’s ever tightening fiscal envelop in which statutory expenditures—which are protected by the Constitution of the Republic from non-payments—are this year taking up roughly 90 percent of domestic revenues estimated at K4.4 trillion, the space for scaling up healthcare spending is nearly inelastic.
Moreover, expenditures are rising at a faster rate than revenue and causing deepening fiscal deficits—which means finding money to fill the void left by USAid and others through national budgets that are already crowded out by high public debt levels at more than 80 percent of the economy, would be like squeezing water out of sand.
General government expenditure for Malawi hovers around 23 percent of gross domestic product (GDP) which, according to the World Health Organisation (WHO), places Malawi as a low to medium level of fiscal capacity—again implying limited ability to increase healthcare funding from the public purse.
And with taxation capacity in the lowest end of fiscal capacity category as Malawi’s tax-to-GDP ratio is this year estimated at 16.8 percent, the scope for substantial increases in the health budget is limited without dismantling the nation’s budget framework itself.
In addition, high public debt levels—with the debt-to-GDP ratio now at slightly over 80 percent—has put the country in distress, leaving it with a debt carrying capacity so weak that it also limits government’s ability to boost spending not just to health, but also other sectors.
The internationally recommended maximum debt-to-GDP ratio for low-income countries is 40 percent.
Ngwale called for additional health financing mechanisms such as compulsory civil servants health insurance, introduction of fees in public hospitals and health levies on various items such as alcohol and tollgates, among others.
Explained Ngwale: “You see, instead of introducing
compulsory health insurance for civil servants, the government actually asked who wants to go on health insurance. Only 12 percent of civil servants said yes, therefore, we are still where we were.
“We cannot depend on the budget alone. We cannot depend on the money that MRA [Malawi Revenue Authority] collects to fund the health sector, it will not work.”
Although there is no standard allocation for the drug budget, Health and Rights Education Programme executive director Maziko Matemba said in an interview that the budget for medicines should cover at least half of the health sector investment budget.
WHO recommends a health sector investment of at least $80 (about K140 080) per capita. However, the Malawi Health Sector Strategic Plan III (HSSPIII) covering the period
2023-2030, found the $80 per capita unattainable, and set the target of $50 (about K87 500) per capita by 2030.
The $50 target was based on the fact that the country was only able to achieve about $40 (around K70 000) per capita in the past decades.
Based on the HSSPIII targets, the current allocation in the proposed 2025/2026 drug budget falls way below the recommendation, as the K63 billion allocation translates to K3 150 per person, based on a population of 20 million.
Matemba pointed out that funding for medicines should be a priority in any national budget.
“Most Malawians are unable to buy medicines on their own. This might result in preventable deaths from serious health cases; hence, the need to address the issue of funding,” he said.
Matemba urged MPs to push for increased allocation towards the drug budget, and for government to consider alternative health financing mechanisms, especially now that development partners are pulling out funding.
Observed Matemba: “The United States aid freeze will create huge gaps in health sector services.
The country needs to plan ahead so that it does not experience drug stock outs in the event that other donors do not come in to boost drug stocks.”
