The mid-term budget presentation seems to have attracted some wrath, for so many reasons, including failure to outline austerity measures. And, in this interview with our Mzuzu Bureau Supervisor JOSEPH MWALE, Minister of Finance SIMPLEX CHITHYOLA-BANDA delves into why he thinks this is the best trajectory.
What are the most significant challenges facing the country’s economy?
As we have seen in the 2024 IMF World Economic Outlook, global growth is slowing down, inflation is rising, and supply chain disruptions continue to affect economies worldwide. Locally, we have been hit by a combination of external shocks and domestic challenges such as extreme weather conditions that have affected agricultural productivity, rising food prices, and the need to manage fiscal deficits. We are also grappling with inflationary pressures, which have been particularly hard on the average Malawian household. In 2024, food inflation hit an average of 41.6 percent, severely affecting people’s purchasing power.
How do you plan to tackle inflation, particularly food inflation, through this budget?
As you know, Malawi is an agri-based economy, and food prices are often closely tied to agricultural production. In response, the government has implemented measures to support food security, including increasing support for irrigation schemes and promoting agricultural productivity. We are also prioritising the rehabilitation of existing irrigation infrastructure to reduce the vulnerability of our food production systems to climate shocks. For example, through the Green Belt Authority, we have mobilised over 931 medium and large-scale farmers covering nearly 40 000 hectares of irrigated land. Additionally, we are working closely with development partners to address food insecurity.
Despite the external support, the government faces challenges in raising domestic revenue. The budget review indicates a shortfall in revenue collection. What steps are being taken to address this gap?
Yes, the shortfall in domestic revenue is one of the challenges we are working to address. In the first-half of the fiscal year, we collected 8.2 percent less revenue than expected. This was mainly due to delays in revenue collection, particularly in the corporate sector, and the impact of rising inflation on consumer spending. However, we are working to improve our domestic revenue collection mechanisms. We are strengthening the Malawi Revenue Authority (MRA) through better tax administration systems, closing loopholes, and improving compliance among businesses and individuals. Additionally, we are looking at expanding the tax base by formalising the informal sector, which has traditionally been under-taxed. By bringing more people and businesses into the tax net, we can increase revenue and reduce the country’s dependency on external support. We are also working with the IMF and other partners to improve the efficiency of tax collection, ensuring that the government has the resources it needs to fund its priorities.
How sustainable is Malawi’s debt?
While Malawi’s debt has increased in recent years, much of it has been directed towards projects that will generate long-term economic returns such as infrastructure development and agricultural modernisation. However, we are committed to maintaining fiscal discipline, reducing non-essential borrowing, and ensuring that our borrowing is aligned with the country’s development goals. The IMF-supported ECF programme also emphasises prudent debt management, ensuring that we only borrow for projects that will contribute to sustainable economic growth. Furthermore, we are working on increasing domestic revenue, which will help us reduce our reliance on external borrowing in the future.
What are government’s priorities for the second-half of the fiscal year?
They include continuing to address the economic impacts of the global downturn, managing inflation, and ensuring that we maintain fiscal discipline. We will continue to focus on strengthening public finance management, improving revenue collection, and ensuring that essential services such as healthcare, education, and agriculture are adequately funded. We are also focused on maintaining the momentum of our infrastructure development programmes and ensuring that critical projects, particularly in healthcare, agriculture, and transportation, are completed on schedule.
