When the Democratic Progressive Party (DPP) took office after the September 16 2025 General Election, it inherited an economy weighed down by chronic fiscal deficits, high inflation, foreign exchange shortages and heavy reliance on domestic borrowing.
A 100 days later, the slide appears to have halted. Yet signs of a decisive turnaround remain elusive.
The question is not whether the economy has been fixed, but whether early policy choices have restored discipline and anchored expectations.
Early signs of fiscal restraint emerge
October 2025, the first full month under the new administration offers the earliest test.
Data from the Reserve Bank of Malawi (RBM) show that the fiscal deficit narrowed sharply to K10.8 billion in October 2025, a marked improvement from deficits exceeding K300 billion in preceding months, including K327.4 billion in September 2025.
While one month does not establish a trend, the October outcome contrasts with the volatility that characterised much of the year and points to tighter short-term expenditure control.
The improvement coincided with early stabilisation measures, including limits on non-essential travel, suspension of non-critical recruitment, tighter procurement, payroll audits, renewed cash budgeting and stricter expenditure controls.
On the revenue side, the Mid-Year Budget Review introduced bold revenue measures, including transaction levies on bank and mobile money transfers, a revised Pay as You Earn (Paye) structure, a higher value added tax (VAT) rate of 17.5 percent, enforcement of rental income tax and stricter remittance of revenues and dividends from ministries and State-owned enterprises.
These actions align with the Democratic Progressive Party (DPP) manifesto’s commitment to fiscal consolidation through expenditure rationalisation and enhanced domestic revenue mobilisation.
However, the manifesto’s more ambitious savings targets of K500 billion in 2026 rising to over K1.5 trillion annually by 2028, remain forward-looking and cannot yet be tested within a 100-day window.
Borrowing patterns remain unchanged
Despite the October deficit compression, the financing structure shows little change. Throughout 2025, including October, all net financing has been domestic, with no foreign budget support or concessional inflows recorded.
The banking system continues to absorb the bulk of government borrowing, sustaining crowding-out risks for private sector credit.
Interest costs remain a major constraint. Domestic interest payments reached K197.7 billion in October, reflecting the cumulative burden of past borrowing.
This underlines a core vulnerability: even when headline deficits narrow, legacy domestic debt continues to limit fiscal space and complicate consolidation.
Beyond headline deficit figures, financial market data compiled by Nico Asset Managers Limited show domestic borrowing pressure remained elevated through the end of 2025.
The investment advisory firm’s November Monthly Economic Report showed that government raised K581.39 billion through Treasury notes in November, followed by a further K210.27 billion in December, largely through long-dated instruments.
The continued reliance on Treasury notes, despite October’s sharply narrower deficit, suggests borrowing was driven less by new spending and more by rollover needs and cash-flow management, locking in high interest costs at yields exceeding 30 percent on longer tenors.
Inflation softening, but still high
Inflation data reinforces the picture of stability without relief. National Statistical Office Consumer Price Index figures show a month-on-month inflation rate of 2.21 percent in October and 2.24 percent in November.
These readings are lower than the sharp spikes seen in late 2024 when monthly inflation reached 3.2 percent in November and 4.55 percent in December, but remain elevated.
RBM spokesperson Boston Maliketi Banda argues that the recent inflation path represents a break from historical seasonal patterns.
“Contrary to expectations, month-on-month inflation dipped in September and marginally rose in October,” he said, noting that inflation typically accelerates sharply as the country enters the lean period.
He attributed the moderation to food prices, saying that month-on-month food inflation fell to 1.9 percent in September and 1.7 percent in October compared to a five-year October average of 4.7 percent.
Banda said government communication on maize importation and State control of strategic grain “significantly eliminated speculative trading and hoarding,” helping ease food-driven inflation pressures.
He said the fiscal discipline and foreign exchange market interventions had “culminated in lower inflationary pressures and support sustained disinflation going forward,” citing RBM surveys showing renewed confidence and improved inflation expectations.
However, Scotland-based Malawian economist Velli Nyirongo cautioned against reading too much into the short-term data.
“Malawi’s macroeconomic situation shows some early improvements, but, so far, they indicate stability rather than a full economic turnaround,” he said, adding: “Inflation remains high, reflecting past policy slippages, exchange-rate pressures and supply-side constraints.”
Forex position improves on paper
Foreign exchange indicators point to modest stabilisation rather than structural easing. In October 2025, total forex reserves rose to $526.8 million, an equivalent of 2.1 months of import cover, a jump from $511.8 million or two months of import cover the previous month.
However, the increase was driven by private sector holdings while gross official reserves declined.
Banda acknowledged that forex supply remains thin and demand high, with waiting lists still too long for sustainable operations.
However, he said measures such as the suspension of forward contracts, waivers under surrender requirements and adjustments to export proceeds repatriation “have helped to sanitise the market,” narrow the parallel market premium and reduce hoarding among authorised dealers.
Market sentiment has improved with the parallel exchange rate easing to around K3 800 per dollar compared to between K4 000 and K4 500 against the dollar ahead of the September election.
Still, access to forex remains constrained for businesses. Khama Mbaula, founder of Afritrix, said delays persist.
“On average, it takes about four months, so there is no change and nothing has improved,” he said.
Mzuzu University economics lecturer Christopher Mbukwa remains sceptical. “I can hardly see improvement in the macroeconomic trajectory during the first 100 days, as key indicators such as forex shortages, heightened inflation and interest rates remain off track,” he said, warning that fiscal slippage could quickly undo early gains.
University of Malawi economics lecturer Edward Leman said yesterday that to convert the current macroeconomic stabilisation into a credible and durable recovery, Malawi should prioritise a coordinated package of fiscal, monetary and external-sector actions over the next three to six months, with emphasis on execution rather than new policy announcements.
He said: “Fiscal discipline must be reinforced through expenditure prioritisation rather than blunt austerity.
“Government spending should be redirected toward productive and high-multiplier sectors, particularly agriculture, mining, energy and trade-enabling infrastructure, while existing austerity measures are rigorously enforced across all ministries, departments and agencies.”
Lemani urged government to reduce domestic borrowing and ensure that it is better targeted and restructured, adding that near-term review of the domestic debt portfolio should guide negotiations with commercial banks to ease debt-servicing pressures and smooth maturities.
He said inflation control should combine food-supply management with targeted monetary interventions.
Leman said the external sector recovery should focus on exports and foreign exchange market functioning.
“Policy should promote exports where Malawi has a comparative advantage,” he said.
The 100-day verdict
In macroeconomic terms, the DPP administration’s first 100 days mark a pause in deterioration rather than a pivot to recovery.
The data show early fiscal restraint, some moderation in inflation momentum and calmer exchange-rate sentiment, but inflation remains high, forex access constrained, borrowing pressures are still unresolved and the fiscal space is only getting tighter.
Whether stabilisation holds and evolves into recovery will depend on sustained discipline, avoidance of slippages and delivery on promised reforms well beyond the initial 100-day window.
