Malawi has once again trimmed the development budget during the Mid-Year Budget Review, the third time in four years, raising alarm over the country’s growth prospects.
Ministry of Finance, Economic Planning and Decentralisation trimmed this year’s allocation from K1.77 trillion to K1.58 trillion amid slow donor disbursements and delays.
In the previous financial year (2024/25), development expenditure was slashed to K1.58 trillion from the approved K1.77 trillion due to contractual bottlenecks.
In the 2023/24 financial year, development expenditure was increased from an approved provision of K831 billion to MK1.08 trillion on account of an increase in both foreign financed projects and domestically financed projects due to the exchange rate correction and expected disbursements following the approval of an International Monetary Fund (IMF) programme.
However, in the 2022/23 financial year, development expenditure was also cut by K189.3 billion from the approved K818.9 billion to K629.6 billion.
In an interview on Tuesday, Mzuzu-based economist Christopher Mbukwa said this could threaten infrastructure, jobs and Malawi’s push toward middle-income status under Malawi 2063 (MW2063), the country’s long-term development plan.
He observed that cutting development spending will affect the establishment of the much needed infrastructure in energy, agriculture and human capital, which is needed for growth to take place.
Mbukwa, who teaches at Mzuzu University, said: “Furthermore, cutting development budget also leads to low productivity, limits jobs creation and private sector growth.
“Ultimately, foundations upon which Malawi can use for wealth creation as purported in the Malawi 2063 cannot be realised.”
Already, Malawi’s quest to align its national budget with MW2063 is facing significant hurdles, with a United Nations (UN) analysis revealing glaring discrepancies between the fiscal plan and the MW2063 First 10-Year Implementation Plan (MIP-1).
This misalignment raises concerns about the country’s ability to meet its developmental targets, particularly those outlined in MIP-1, which focuses on critical areas such as commercialised agriculture, manufacturing and industrialisation.
Published UN data show that the top three spending priorities to achieve MIP-1 objectives as modelled by the National Planning Commission (NPC) are economic infrastructure at 35 percent, agricultural productivity and commercialisation at 18 percent and human capital development at 11 percent.
Yet, the 2025/26 National Budget allocated the highest share to effective governance systems and institutions at 45 percent against the MIP-1 recommendation of eight percent followed by human capital development at 30 percent against the recommended 11 percent and agricultural productivity and commercialisation at nine percent against the recommended 17.6 percent.
Consequently, MIP-1 has reported a progress of 43 percent progress.
Funding constraints had delayed some major projects, including expanding area under the Greenbelt Initiative, establishing a Mining Regulatory Authority, supporting establishment of large private mining companies largely promoted under Public Private Partnersip (PPPs) and facilitate increase in cement production.
This is despite Ministry of Finance, Economic Planning and Decentralisation indicating that MIP-1 will continue to be the guiding policy in resource allocation and programme implementation to transform the country into a self-reliant industrialised upper middle-income economy by 2063.
Economist Milward Tobias and former presidential candidate in the May 2025 General Election observed that reducing development expenditure will hamper efforts to put a solid foundation for the growth of the economy and graduating people from poverty.
“Development expenditure that contributes substantially to economic development and since we are not creating that foundation; we cannot develop.
“What is even concerning is that the chance to increase development expenditure is there if those in authority would be ready to do away with wastage and luxury.”
Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamvekha said in his 2025/26 Mid-Year Budget Review Statement that the under-performance of development expenditure is emanating from foreign financed projects, which registered slow implementation progress on various projects due to their limited capacity to import construction materials.
In the fiscal year, government has projected K2.711 trillion in revenue and grants for the first-half of the year. Instead, it collected K2.383 trillion, representing a 12.1 percent shortfall.
Domestic tax revenue also underperformed, delivering K2.057 trillion compared to the projected K2.139 trillion, largely due to reduced import volumes as forex shortages constrained trade.
The steepest underperformance came from foreign grants. Government received K325.5 billion against a projection of K571.4 billion, a drop of 43 percent, reflecting procurement bottlenecks and slower disbursement from cooperating partners. Dividends from State-owned enterprises reached only K5.93 billion, far below the expected K29.8 billion.
Expenditure rose faster than anticipated, with mid-year outturns reaching K4.420 trillion, above the projected K4.244 trillion. Recurrent spending stood at K3.502 trillion, exceeding targets by K281.8 billion.
Wages and salaries exceeded projections by K125.9 billion, reflecting large recruitment drives in health, education and the security cluster, alongside increased honoraria for traditional leaders. Election spending rose from K162.9 billion to K212.9 billion, a 30.7 percent overrun.
Several key government votes—including State Residences, the Office of the President and Cabinet, and the Office of the Vice-President—recorded utilisation rates approaching or exceeding 100 percent by September. Expenditure on goods and services reached 71 percent of the approved annual allocation within six months.
While foreign-financed development projects lagged due to import restrictions and foreign exchang shortages, domestically financed projects overspent by K129 billion, partly due to inflated certificates of works and accelerated implementation of locally funded programmes.
Malawi’s public investment in infrastructure has been negligible in the past two decades, averaging about 4.18 percent over a 20-year period between 1998 and 2017, according to the World Bank.
At 4.18 percent, this is lower than in Mozambique at 10.7 percent, Zambia’s 4.82 percent and Tanzania at 4.21 percent.v
