The World Bank has identified a number of expenditure reforms that could save Malawi between 2.7 and 4.5 percent of gross domestic product (GDP) and slow the country’s widening fiscal imbalances.
In its Malawi Public Finance Review 2025, the Bretton Woods institution said decisive action on wage bill controls, procurement reforms, travel rationalisation and better project selection could stabilise public finances and an economy characterisied by runaway inflation at 29.1 percent and widening budget deficit projected at K3.1 trillion this fiscal year.
The expenditure reforms come amid concerns that Malawi has reached a point where “there is no room for fiscal slippage” given persistent deficits, rising debt service and recurrent pressures in budget execution.
The review indicates that Malawi’s expenditure structure has grown increasingly rigid, with the wage bill, allowances and poorly prioritised development projects consuming a rising share of the budget.
The bank argued that targeted rationalisation would generate substantial fiscal space without undermining frontline service delivery.
One of the largest savings, according to the World Bank, would come from overhauling of procurement systems.
This means that fully transitioning to e-procurement could yield between 0.83 and 1.38 percent of GDP, with the report noting that digital platforms “improve transparency, reduce opportunities for rent-seeking and ensure better value for money”.
The bank further said travel and allowances, long viewed as a major source of leakage, also feature prominently.
“Reinstating cost-containment measures similar to those used in 2013, targeting “allowances and excessive travel” could save 0.27 to 0.45 percent of GDP, the report states, according to the World B ank.
In an interview, Economics Association of Malawi president Bertha Bangara-Chikadza argued that Malawi has the resources, but lacks the discipline to allocate them effectively.
She said the Integrated Finance Management and Information System (Ifmis) remains critical for tracking expenditures and reducing waste, but warned that internal resistance could undermine its impact.
On his part, World Bank senior economist Jakob Engel urged policymakers to confront the scale of the challenge.
He warned that without a decisive shift in direction, Malawi risks “falling off the map,” emphasising that the full package of rationalisation options could generate savings and help rebuild fiscal credibility.
The World Bank’s recommendations mirror the austerity measures announced by Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamvekha, including tighter travel restrictions, reduced fuel allocations for senior officials and a freeze on recruitment and promotions.
He said government will save K44 billion in the remaining months of the 2025/26 fiscal year because of the austerity measures.
Mwanamvekha said that travel restrictions and ban of high-value procurements will save the economy more although the austerity measures’ impact on revenues will not be imminent.
Apart from travel restrictions, procurement ban and embassy staff controls, he said fuel entitlements will be cut by 30 percent for senior government officials and that to minimise the gap between revenue and expenditure requirements, it will fully adopt a cash budgeting approach that strictly aligns funding with available resources rather than projected cash flows.
But the World Bank said management of wage bill, which has surged to K1.6 trillion, consuming 25 percent of recurrent expenditure and 38 percent of all domestic tax revenue, remains central, calling for activation of the human capital management module of Ifmis to automate payroll controls.
