It was Mark Twain that said there are “lies, damn lies and statistics”. During this political season, we may expect to hear lots of statistics, and of course, promises.
Last election in 2020, many promises were made, some of which were based on flimsy assumptions. In making new economic policies, we will need a more solid foundation of information. This can be achieved through greater fiscal transparency where information about the government’s finances and fiscal policies are disclosed to the public.
With the current level of uncertainty around key macro variables, the quality of fiscal data reporting is less reliable. In fact, it is common during election years that the fiscal outcome (deficit) for the year, once confirmed, is significantly higher that what was originally projected.
In the International Monetary Fund (IMF) Article IV report issued in July 2025, Malawi’s overall fiscal deficit was projected as 10.1 percent of gross domestic product (GDP) for 2024/25 financial year. The average fiscal deficit in the Southern African Development Community (Sadc) region for 2024/25 financial year is four to five percent. Clearly, our deficit is too high.
Why does the deficit matter so much?
To improve the public finances, we should be running a deficit of four to five percent percent of GDP. Otherwise, persistent fiscal deficits lead directly to excessive borrowing and growing interest payments to service debt (see graph below).
For this reason, we will have to reduce the deficit whether or not we choose to go onto an IMF programme. This will require us to know where spending is currently ineffective and how far we can cut such spending. That is why we need quality fiscal data to identify necessary budget cuts.
Fiscal transparency and corruption
Budget transparency is assessed under the Open Budget Index. In the 2023 publication, Malawi scored 6/100, which was among the lowest globally, reflecting very limited publication of key budget documents (content and timeliness).
Consequently, the public has limited access to information on government revenue and spending. The score is significantly lower than our 2021 score. Although the government publishes key budget documents online, there are issues with data quality and accessibility of information on State-owned enterprise debt, including arrears which are growing.
Lack of fiscal transparency and incorrect reporting of fiscal information creates an environment where corruption can go unchecked. Transparency International’s 2024 Corruption Perceptions Index ranked Malawi 107th out of 180 countries, with a score of 34 out of 100, suggesting a perception of significant corruption within the country.
On this front, Malawi has seen minimal improvement in the last decade. Overall, the Corruption Perception Index score has remained stagnant at around 34 points, well below the global average (~43) and hardly shifting in recent years.
Over the years, persistent corruption has been flagged in multiple spheres such as public procurement, Covid-19 funds, agriculture subsidies (e.g., the Affordable Inputs Programme), and echoes of the 2013 Cashgate scandal remain, all underscoring recurring gaps and issues in governance and accountability.
Cut your cloth to suit your measure
In this economic series, we have been highlighting the widening fiscal deficit, as well as the sharp increase in public debt which is now at 90 percent of GDP, up from 45 percent in 2019. Clearly, something has to give. We simply do not have the resources to cover the level of public sector consumption.
Here are just a few areas we need to carefully scrutinise in the next administration: Size of government delegations going abroad; size of motorcades and police escorts for VIPs, size of public sector wage bill relative to performance, extent and coverage of subsidies for fuel and fertiliser and the cost of maintaining vehicles across the public sector
Notably, the public wage bill has nearly tripled within a few years from K436 billion (FY2021/22) to K1.28 trillion (FY2024/25 projection). This is not sustainable.
An economic mess
Speaking of transparency, we must also allocate responsibility for fiscal decision-making. Unfortunately, we have made a big mess of the economy that won’t be easy to clean up. In most cases, we would look to the Ministry of Finance and Economic Affairs for key policies and decisions on the economy.
If anyone should know how the mess was started it is the Treasury, and specifically, the Minister of Finance and Economic Affairs. Budget formulation takes place in Ministry of Finance and Economic Affairs, and implementation is facilitated by the Accountant General’s Office.
As mentioned earlier, lack of transparency in our public finances makes it difficult to adequately reconcile government accounts and allows leakages to take place. The horrendous activities during Cashgate are a bad memory for the entire nation, but some of the vulnerabilities and loopholes remain even today.
The cashgate scandal involved the misappropriation of government funds through a manipulated financial system (Ifmis), with fraudulent payments made to companies that did not provide goods or services. It is estimated that up to $250 million was lost through these fraudulent payments – half of annual tobacco earnings! It took many years to regain public confidence and donor trust in our Ministry of Finance and Economic Affairs.
Yet, in 2022, similar issues arose in the Accountant General’s Office, with reports of unauthorized allowances paid to officials, followed by arrests made for fraudulent activities involving significant sums of about K280 million.
The forensic audit highlighted failures in internal controls, procurement system weaknesses, and inadequate oversight by senior officials who were responsible for authorizing payments. As a result, 40 public officers were eventually arrested due to theft of allowances.
In its 2024 review, the IMF made the following observations on the accumulated costs of weak financial controls in Malawi: “lack of transparency and accountability of fiscal budget execution has contributed to macroeconomic imbalances accumulated since 2012, leading to unsustainable debt and pressures on the exchange rate and inflation”[1].
Revolving doors
Accountability for economic performance ultimately lies with elected political office bearers. Within MoF we have seen frequent changes at both ministerial level and Office of the Secretary to the Treasury (ST). In the past five years, we have had three different ministers of finance and three, maybe four STs. In fact, another change has been made this very week, a month before the elections. We have also had two governors at the Reserve Bank of Malawi. Such frequent changes in a short period of time are unusual and weaken overall accountability for financial management. With a only few weeks to the elections, one has to ask: Who is really controlling the public purse in Malawi?
*Taz Chaponda is a senior economist who has worked for Mastercard Foundation, the IMF and the World Bank. He was budget director in South Africa and the managing director for Malawi Agriculture and Industrial Investment Corporation. He has economics degrees from Harvard University and the University of Oxford, and an MBA from INSEAD Business School.
Feedback: chaponda@hotmail.com
