Malawi’s fiscal deficit widened sharply in November 2025, surging by about 607 percent to K76.4 billion from K10.8 billion in October, Ministry of Finance, Economic Planning and Decentralisation data show, reversing a brief period of fiscal tightening.
The November 2025 Monthly Economic Review published by the Reserve Bank of Malawi (RBM) shows that the deterioration followed a renewed imbalance between spending and revenue.
During the month under review, government expenditure stood at K498.5 billion compared to K422.1 billion revenue collected, reopening a gap that had nearly closed in October.
RBM data further show that the November outcome was driven largely by a sharp decline in domestic revenues, which fell 25.6 percent month-on-month, mainly due to a 37.8 percent drop in tax revenue.
Although grant inflows more than doubled to K90.8 billion, they were insufficient to offset rigid recurrent expenditure, particularly interest payments of K154.1 billion. Development spending also rose to K76.7 billion, adding to fiscal pressure.
Cumulatively, Malawi recorded a total fiscal deficit of about K1.45 trillion between April and November 2025, covering the first eight months of the 2025/26 financial year.
RBM figures show that the deficit was heavily front-loaded in the first half of the year, before moderating later.
Between April and September, government spending consistently outpaced revenue collection, reflecting high domestic borrowing costs, rising interest obligations and weak tax performance.
During this six-month period, Malawi accumulated an estimated K1.36 trillion deficit, accounting for more than 93 percent of the deficit recorded by November.
In contrast, the October–November period recorded a combined deficit of just K87.2 billion, pointing to sharp though fragile shifts in fiscal dynamics late in the year.
On a monthly basis, the contrast between the two periods is stark.
From April to September, a period largely associated with fiscal execution under the Tonse Alliance administration led by Malawi Congress Party, the government recorded an average monthly deficit of K226 billion. This phase was marked by strong expenditure inertia, particularly on interest payments, alongside persistent revenue underperformance.
In comparison, the October–November period, following the transition to a Democratic Progressive Party (DPP) administration, posted an average monthly deficit of K43.6 billion, an almost 80 percent reduction from the earlier period.
The data from the first two months suggest some fiscal restraint following austerity measures announced by Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamvekha during the Mid-Year Budget Review Statement presented in November 2025.
However, economists warn that the narrowing deficit may not be sustainable. In an earlier interview, Scotland-based Malawian economist Velli Nyirongo said deficit pressures were likely to persist due to reduced external financing.
“With the early end of the IMF programme and reductions in grants, Malawi now faces a shortage of external financing,” he said in a WhatsApp response.
“This makes it more likely that the government will turn to domestic borrowing and money creation, both of which have already contributed to inflation and a weakening currency.”
Nyirongo cautioned that sustained reliance on domestic financing could undermine investor confidence and deepen macroeconomic fragility.
Mzuzu University economics lecturer Christopher Mbukwa warned that persistent fiscal gaps remain a major concern.
“The persistent deficits are a cause for concern. We are accumulating deficits on deficits,” he said.
Mbukwa says 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.
In its Policy Notes titled ‘No time to waste: Policy priorities for Malawi’s recovery’, the World Bank and United Nations in Malawi urged the government to fully implement the Integrated Financial Management and Information System in the short term to reduce waste and strengthen expenditure controls.
In the longer term, the institutions called for stronger parliamentary oversight, improved access to fiscal information and consistent enforcement of audit requirements under the 2022 Public Finance Management Act, warning that weak accountability risks entrenching Malawi’s debt and deficit cycle.
