Government has extended austerity measures into the 2026/27 financial year as it seeks to contain public spending and stabilise the economy amid persistent fiscal pressures and limited fiscal space.
The move follows expenditure control measures introduced during last year’s Mid-year Budget Review and reinforced in the State of the Nation Address (Sona) in which President Peter Mutharika outlined a discipline-first approach to stabilising the economy and spur economic growth.
A memorandum from Secretary to the Treasury Cliff Chiunda to the Chief Secretary to the Government, all controlling offices of ministries, departments and agencies; chief executive officers of State-owned enterprises and parastatals, which The Nation has seen confirms that the spending controls will remain in force in the upcoming financial year.
“The economic shocks that necessitated austerity measures during the Mid-year Budget Review are still prevalent, affecting our country’s economy. As such, there is still a need to continue implementing the expenditure control measures in the upcoming financial year,” the circular reads in part.
The measures include restricting publicly funded foreign travel for public servants to only “extreme” essential trips approved by the Chief Secretary to the Government, maintaining a moratorium on the procurement of new government vehicles and suspending recruitment except in critical services.
Fuel entitlements for public officers, including Cabinet ministers and senior government officials, remain reduced by 30 percent.
Government has also directed that each embassy should have no more than five officials, including the ambassador or high commissioner, while new institutions will not be created or operationalised until further notice.
Authorities have further instructed that all procurement be conducted through the Malawi National Electronic Procurement System and that Local Purchase Orders be generated through the Integrated Financial Management Information System as part of efforts to tighten expenditure controls.
State-owned enterprises have also been directed to remit dividends and surplus resources to the Treasury rather than keeping idle balances while government continues borrowing to finance the budget.
Treasury data suggests the austerity programme introduced during the Review achieved its immediate fiscal objective.
According to the 2026/27 Financial Statement, the expenditure control measures were expected to reduce total government spending by about K158 billion by the end of the fiscal year.
Revised fiscal projections indicate that total expenditure is now expected to close the year at about K8.43 trillion, down from the mid-year projection of K8.59 trillion, suggesting the spending controls have helped prevent budget overruns and slow the growth of public expenditure.
Economist s say the continuation of austerity measures reflects government’s attempt to restore fiscal discipline and stabilise public finances under mounting economic pressure.
Mzuzu University economics lecturer Christpher Mbukwa said the measures introduced last year were beginning to show results in budget performance.
“There seems to be no expenditure overrun and the government has managed to save resources,” he said.
“If it can be sustained, we are likely to see benefits even in terms of the fiscal deficit.”
According to Mbukwa, expenditure discipline is critical to reducing borrowing and preventing the fiscal deficit from widening further.
The fiscal deficit for 2026/27 is projected at K2.852 trillion, equivalent to 9.0 percent of gross domestic product (GDP), down from 11.9 percent in the current year. This is still one of the highest deficit-to-GDP ratio in sub- Saharan Africa.
In a separate interview, Scotland-based Malawian economist Velli Nyirongo said the continuation of austerity measures signals government’s intention to stabilise the economy while managing tight fiscal conditions.
However, Mbukwa cautioned that prolonged austerity could also have unintended consequences for service delivery.
He said measures such as the recruitment freeze could reduce the government’s capacity to deliver essential services, particularly in sectors such as health, education and public administration.
Good governance expert George Chaima said the extension of the austerity measures demonstrates government’s commitment to restoring fiscal discipline.
Last month, President Mutharika also limited Cabinet ministers’ local travel to once a month after noting that ministers were travelling frequently while the government was pursuing austerity measures.
The austerity measures were first introduced on November 6 last year as part of efforts to cut public spending for the remainder of the 2025/26 financial year.
In recent years, Malawi has been experiencing persistent budget deficits driven largely by statutory expenditures such as wages and salaries, public debt interest payments and pensions, leaving government with limited fiscal space for development spending.
