Ministry of Finance and Economic Affairs has drawn criticism from economists over funding cuts to tourism and mining, two of the three critical sectors billed as key drivers of economic growth alongside agriculture.
The economists fear that the cuts will slow down economic growth, reduce revenue and limit job creation.
Minister of Finance and Economic Affairs Simplex Chithyola Banda announced significant cuts in tourism and mining, which make the ATM strategy with agriculture to stimulate economic growth.
The Ministry of Tourism budget has been cut by 7.6 percent from K9.44 billion to K8.77 billion while the Ministry of Mining’s allocation was slashed by 19 percent from K8.74 billion to K7 billion.
Conversely, the Ministry of Agriculture received a 15.6 percent increase, with its budget rising from K480.37 billion to K555.53 billion.
Reacting to the cuts, economists have cautioned that the increased funding to the agriculture sector is heavily skewed towards recurrent expenditures and could hinder efforts to commercialise the sector and unlock its full economic potential.
Commenting on the significance of the cuts to mining and tourism on Tuesday, Economics Association of Malawi president Bertha Bangara- Chikadza warned that the reduction in funding to tourism and mining could subdue economic growth, dampen revenue and affect job creation.
“Reduction in mining funding does not signal a commitment to transform the mining sector, which is key to boosting the country’s export earnings and foreign exchange reserves,” she said.
Echoing the concerns, Scotland-based Malawian economist Velli Nyirongo emphasised that cuts could jeopardise the planned activities to two critical sectors that are at the centre of economic growth in the short to medium-term.
“Budget cuts to tourism and mining could further stall growth envisaged inthe two sectors.
“These sectors are key to stimulate rapid economic growth and development,” he said.
Data from the Reserve Bank of Malawi (RBM) indicates that the government expects the economy to recover from a growth rate of 1.8 percent this fiscal yer year to four percent in the next fiscal year, driven by expected rebounds in the agriculture, construction and mining sectors.
The RBM’s latest Financial and Economic Review projects that the agriculture sector will grow by 4.5 percent in 2025, supported by favourable weather and the enhanced implementation of megafarms.
Mining and construction are also forecast to grow by 4.8 percent and 5.5 percent, respectively bolstered by stable electricity supply and the government’s expedited road construction projects.
However, the economists fear that budget cuts to key economic and enabling sectors threaten to derail these projections.
They said without adequate funding, critical infrastructural projects and sectoral initiatives could be delayed, undermining the progress needed to achieve the government’s ambitious growth targets.
In the budget, the minister also announced a cut to the Ministry of Energy’s budget from K42.3 billion to K41.04 billion while the Ministry of Transport and Public Works also saw its allocation downsized from K68.6 billion to K65.5 billion.
The reductions in energy and infrastructure funding coupled with those in tourism and mining, have sparked concerns among economists about their potential to undermine economic recovery and growth and runs counter to aspirations outlined in Malawi 2063 (MW2063), the country’s long-term development plan.
MW2063 seeks to turn Malawi into a lower middle-income economy by 2030 and an upper middle-income economy by 2063 and for that to happen, economists argue that the economy has to grow consistently by more than 10 percent
