Malawi needs an effective graduation strategy if development activities are to carry on in the midst of partners pulling out their financial support.
The Economics Association of Malawi (Ecama) and the National Planning Commission (NPC) in their joint final 2025/26 Budget Analysis Report have observed that global indications point to donor funding uncertainty, yet Malawi’s development budget remains heavily dependent on donors.
Titled Accelerating Towards 2030 Malawi 2063 (MW2063) First 10-Year Implementation Plan (MIP-1) Milestones, the analysis, published on Ecama’s website last week, states that what compounds the situation is that the financial blueprint has been formulated in a fiscally challenging context of macroeconomic instability.
Reads the analysis: “Recent global developments points to uncertainty around official development assistance for Malawi. For instance, the United States [US] Government recently issued a stay order on 28 January 2025, which led to the complete withdrawal of financial support by the United States Agency for International Development [USAid].
“Similarly, the United Kingdom [UK] has announced plans to reduce aid spending from 0.5 percent to 0.3 percent of Gross National Income [GNI] beginning 2027. Statistics from the US Department of State show that USAid contributed an average of $350 million over the years, which is equivalent to 13.0 percent of the 2024/25 FY [fiscal year] budget.”
Based on the analysis, the observation mirrors the trends in development budget allocations from the 2022/23 fiscal year to the 2025/26 fiscal year where an average of 77 percent of actual spending was financed by donors, while the remainder was financed by the Malawi Government.
Parliament last week passed the K8.07 trillion 2025/26 National Budget with crucial sectors getting additional allocations from their initially proposed allocations. The additional allocations were prompted by USAid’s funding withdrawal.
For instance, the health sector’s total expenditure has been adjusted from 9.2 percent to 9.5 percent.
But regardless of the three percent additional allocation, the expenditure is far below the 15 percent Abuja Declaration on Health which entails that countries signatory to the pact must allocate 15 percent of their budget to the health sector.
The additional resources could, however, partly cushion the health sector which is the main casualty of the US government’s funding freeze; hence, poor taxpayers are now unable to access particular critical healthcare services.
But according to the analysis, funding gaps in the health sector are eventually going to undermine efforts to improve healthcare access, ultimately leading to failure in strengthening the health system and addressing other sub-sectors such as nutrition.
This means Malawi will also struggle to attain a lower middle-income status by 2030.
“This is a worrisome development that requires urgent corrective action to ensure our aspiration of attaining a lower middle-income country by 2030 materialises. In terms of the alignment between the proposed 2025/26 budget and MIP-1, the analysis shows most of the focus areas within the pillars and enablers are underfunded or not financed altogether.
“This, however, may reflect prevailing economic, social and environmental realities to which the government is responding to, policy wise,”” further reads the analysis.
The two institutions have, therefore, tipped the government to be prudent in guarding resources allocated to the development budget.
This is apart from accelerating implementation of transformational projects in both the social and productive sectors that if completed, they would address some socio-economic challenges Malawi is currently facing.
Further, the government has also been tipped to set up a multi-agency monitoring team to track expenditures in a timely manner and that it must allocate more resources to large-scale farms as they have potential for higher productivity through irrigation, the use of sufficient high-quality inputs and effective crop management practices.
This, according to the analysis, is one of the reliable ways in addressing recurring food shortages.
Besides, the government has also been urged to support the mining sector which, according to the World Bank’s 20th Malawi Economic Monitor, could earn the country up to $43 billion in export earnings between now and 2040.
According to the World Bank, proper management of mining resources revenue will be integral to the success of the sector and uplifting of the economy.
Minister of Finance Simplex Chithyola Banda last week told Parliament that the government has committed to ensuring that critical public services do not get adversely impacted following the US funding freeze.
He cited the upward adjustment to the health sector as being one of the commitments of the government to ensuring taxpayers continue getting utmost important public services.
He said: “We have ensured that all affected critical services are provided for in the budget to ensure continued service delivery.”
But Chithyola Banda did not specify which sectors government has sacrificed to ensure critical health services that were supported by the US government continue.
The minister did not further explain any new revenue lines that would cover the additional resources.
Initially, the National Budget was in February estimated at K8.05 trillion, but the figure jumped to K8.07 trillion.
