Economists have said the continued widening fiscal deficits reflect a mixture of structural and policy challenges, spending pressure, rigid recurrent commitment and narrow revenue base which have eroded fiscal stability.
The economists said this in the context of continued rising fiscal deficits, with the budget about to close the third quarter with widening deficit.
In an interview on Sunday, Economics Association of Malawi president Bertha Bangara-Chikadza cautioned that the trend is increasingly dangerous and reflects structural weaknesses.
She said the current financing model driven by short-term domestic borrowing to cover recurrent costs, risks pushing Malawi into a debt-inflation loop.
Bangara-Chikadza, who teaches economics at the University of Malawi, said: “Our budget has expanded rapidly without accompanying macro stability. “
She argued that stabilising the fiscal path will require deeper reforms in tax administration, public finance management and strict adherence to planned expenditure.
Economist Gilbert Kachamba on Sunday warned that persistent fiscal gaps remain a major concern and could affect the budget implementation.
“We are accumulating deficits on deficits,” he said, adding that sustained domestic borrowing to finance the gap could crowd out private sector credit, put upward pressure on interest rates and limit fiscal space for future development projects.
With interest payments now consuming more than K200 billion per month, Kachamba said improving debt management and reining in non-priority spending will be crucial to keep the deficit from widening further at the end of the fiscal year on March 31 2025.
On his part, Scotland-based economist Velli Nyirongo described the government’s decision to freeze new hires and promotions as a necessary though insufficient step toward stabilisation.
He warned that without broader reforms, persistent deficits will force higher domestic borrowing, crowd out private-sector credit and intensify inflationary pressures.
Treasury figures show that revenue gains recorded in October, the first month in the third quarter were strong enough to reverse widening gaps between income and expenditure since April when the budget rolled out.
The latest outturn places October revenues at K566.7 billion against expenditure at K577.5 billion, resulting in a modest deficit of K10.8 billion, an improvement from the K327.4 billion recorded in September.
Yet, the broader trend remains unchanged. From April to October, government collected roughly K3.15 trillion while spending climbed to nearly K4.39 trillion, leaving a cumulative deficit exceeding K1.23 trillion, according to Treasury figures.
Meanwhile, domestic revenue and grants in the current fiscal year are projected at K5.46 trillion, down from K5.78 trillion, amid revenues underperforming by 43 percent and grants by 12 percent by the middle of the year.
In the Mid-Year Budget Review Statement last month, Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamvekha acknowledged the strain and revised the projected deficit from K2.498 trillion to K3.128 trillion, an expansion of 25.2 percent.
