Economic experts have expressed mixed reactions on the K8 trillion 2025/26 National Budget with some saying it remains consumption oriented while noting looming funding challenges due to increasing debt interest payment obligations.
This is because the budget shows that interest payment at K2.17 trillion represents half of the projected domestic revenue collection of K4.4 trillion. They argue this is a huge chunk of the budget resources to be used to service public debt and not be invested into the production sector.
“Madam Speaker, Madam, public debt interest is projected at K2.17 trillion which is 8.4 percent of GDP and 49.2 percent of domestic revenues.
“Of the total public debt interest, foreign debt interest is estimated at K61.2 billion while interest for domestic debt is estimated at K2.11trillion,” Chithyola-Banda said.
In an interview, Institute of Chartered Accountants in Malawi (ICAM) chief executive officer Noel Zigowa observed that the increasing burden to service public debt would continue to affect the production sector and that the budget which has huge interest payment allocation, seems consumption-oriented with industrialisation only allocated K4 billion.
“We are supposed to have a budget that encourages job creation and what is happening is while there is more talk of production, industrialisation has just been allocated K4 billion compared to K60 billion for maize purchases which makes the budget more of consumption.
“Again we are talking of 49 percent interest payment which means most of the money generated will go to debt servicing. It’s like we are doing things just to solve the current problems. I can call it fire fighting,” he said.
In a separate interview Malawi Confederation of Chambers of Commerce and Industry chief executive officer Daisy Kambalame said the budget has interesting projects in agriculture and mining sectors and that her institution is eager to see what areas government is going to prioritise in its industrialisation project.
“Apart from agriculture and mining sectors, we have also seen the provisions that they have made and the concessions that they have signed with foreign incorporated companies where they have reduced income tax requirement to 30 percent.
On his part, National Planning Commission director general Thomas Munthali while commending the budget framework for leaning towards ATM strategy which is in line with the country’s long-term development blueprint, said its success will depend on the performance of the economy and global economy.
Munthali said: “The challenges that we have seen as a country like inflation, forex scarcity, are all coming because we are not producing enough and the authorities have put these efforts in making sure that the budget talks on how we promote production and productivity.
“I think what is remaining now is for us to follow though because these are just assumptions depending on the global economy and how the Malawi economy performs. Not everything may come out exactly as it is but if it turns out that the economy performs well and the allocations go by what has happened, we should be able to see some transformation.”
Giving his views, former finance minister who is opposition Democratic Progressive Party vice-president for the South, Joseph Mwanamvekha, described the budget as cosmetic and consumptive with so many projects that would not be funded because of weak revenue streams.
“It is a consumption budget because they have allocated very little to development budget. Most of the resources are given to consumption. If you see in the budget, the projects that have been listed, I can call them wishlist because they cannot be accommodated really. I would say it is a cosmetic budget, it is a political budget,” Mwanamvekha said.
Malawi Local Government Association executive director Hadrod Mkandawire lamented that the local government sector is regretting that the meaningful fiscal devolution continues to drag.
He said much as they were excited by the minister’s posture in his preamble when presenting the local government authorities’ budget, where he re-emphasized that it’s the government’s policy to strengthen fiscal devolution, they have noted a glaring mismatch with the actual budget allocations to local government authorities.
“For instance, while the national budget allocation for development is at K2 trillion, only K140.5 billion has been allocated to Local Government authorities for development, representing only 7 percent of the national development estimates.
“In addition, we have noted that out of the K1.3 trillion allocated to the education sector, only K26 billion has been allocated to the education sector at the local level, representing a meagre 2 percent.
“We further regret that the District Development Fund and Infrastructure Development Fund, which are the only funds that conveniently respond to the District Development Plans and Urban Development Plans, respectively, have been allocated only K7.6 billion and K1 billion,” he said.
