Weak fiscal discipline and growing spending pressures have doubled government expenditure from 16 percent of gross domestic product (GDP) in the 2011/12 financial year to 31 percent in the 2024/25 financial year.
A recent World Bank analysis on public spending shows that the widening fiscal deficit which hsa grown from 0.7 percent to 10.5 percent of GDP over the same period, has been used to finance this spending surge, thereby placing Malawi on an unsustainable fiscal trajectory.
Malawi’s public spending as a share of GDP at 27.4 percent is higher than both regional average of 23.3 percent of GDP and low‑income country (LIC) average of 27.3 percent.
Between 2021 and 2023, Malawi’s average expenditure stood at 27.4 percent of GDP — among the highest in Sub‑Saharan Africa, surpassed only by Mozambique (32.2 percent), Rwanda (30.3 percent), Burundi (30.1 percent) and Zambia (28.9 percent).
Reads the analysis in part: “Rising interest payments and a growing public wage bill have been driving the increase in Malawi’s recurrent spending.
“These spending items constrain fiscal space and flexibility, reduce spending efficiency and crowd out productive investment, undermining long‑term growth prospects.”
According to World Bank data, key rigid expenditures, including the public sector wage bill, interest payments and mandatory transfers to local governments (set at five percent of net domestic revenue), have grown steadily, from 39 percent to almost 90 percent of domestic revenues during the review period.
The interest bill has risen sharply and is estimated to have reached seven percent of GDP in the 2024/25 financial year.
Meanwhile, Treasury data shows that the 2025/26 revised National Budget indicate that total expenditure is projected to increase by K512.56 billion, rising from K8.07 trillion to K8.6 trillion, representing a 6.35 percent increase.
Among others, there is a 6.4 percent upward revision of wages and salaries by K98.5 billion from K1.5 trillion to K1.6 trillion while debt payments were revised upwards by K100 billion from K2.2 trillion to K2.3 trillion.
Ironically, development expenditure has been cut by K89.9 billion, declining from K2.016 trillion to K1.926 trillion.
Scotland-based Malawian economist Velli Nyirongo observed that when a country allocates a large share of revenue towards recurrent and statutory obligations, including wages, interest on debt and pension payments, there is little left for infrastructure, development projects or essential social services.
In the 2025/26 Mid-Year Budget Review Statement, Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamvekha said to minimise the gap between revenue and expenditure requirements, government will align funding with available resources rather than projected cash flows.”
The cumulative deficit for this fiscal year is wider than expected and by September, it had reached K2.037 trillion, up from a projection of K1.534 trillion.
