The Economics Association of Malawi (Ecama) has backed a move by Ministry of Finance and Economic Affairs to maintain the minimum wage and pay as you earn (Paye) tax-free band in the 2025/26 National Budget.
Ecama president Bertha Bangara Chikadza said in an interview on Wednesday that the government’s position is a reflection of its efforts to maintain fiscal stability amid competing demands.
Ecama’s position follows mounting pressure from labour representative organisations and some economists to increase the paye tax-free band and minimum wage, currently at K90 000 per month.
Said Bangara Chikadza: “This approach helps to sustain government revenue levels, ensuring continued funding for essential public services without exacerbating the budgetary deficit.
“It also avoids increasing labour costs for government and small and medium enterprises, which are already operating under tight margins.”
But she warned that this fiscal prudence will come at a steep social cost.
Malawi is grappling with high inflation rate, currently at 30.7 percent, which has eroded real incomes and pushed many households into economic vulnerability.
In a separate interview on Wednesday, Employers Consultative Association of Malawi executive director George Khaki cautioned that without wage or tax adjustments, low-income earners face diminished purchasing power and declining living standards.
He said: “Disposable incomes are getting eroded because of inflation. Standards of living worsen, aggregate demand for goods and services reduces, there is no job creation and jobs are lost.
“Productivity also reduces, affecting the social and economic growth of the country.”
Calls to revise the Paye zero tax band had grown louder ahead of the budget presentation, with the Institute of Chartered Accountants in Malawi proposing an adjustment to K300 000 to shield low-income workers from the full brunt of inflation.
However, the tax threshold remains unchanged.
Economist Christopher Mbukwa said the broader economic implications of wage and tax policy inertia are significant.
He said persistently stagnant incomes amid high inflation could dampen consumer spending, which remains a major driver of the economy.
Mbukwa warned that this dynamic “reduces household consumption and dampens overall economic activity,” adding that it may also lead to declining productivity and weakened labour force participation.
With formal negotiations on the minimum wage currently ongoing, but economists and labour leaders caution that without swift policy action to restore purchasing power, Malawi risks entrenching economic inequalities and slowing recovery momentum.
