Government asked to consider reducing VAT rate to 15% to encourage consumer spending to stimulate the economy and businesses

* Also to remove VAT on cooking oil to support vulnerable groups currently relying on unhealthy cooking oils

* To initiate tax policies that encourage savings and investments, such as tax deductions for interest earned on savings accounts or tax incentives for long-term investments

By Duncan Mlanjira

At the last of three of the 2025-2026 national pre-budget meetings with private sector stakeholders — held at Sunbird Mount Soche in Blantyre — the government has been asked to consider reducing value added tax (VAT) rate to 15% to encourage consumer spending in order to stimulate the economy and businesses.

This was from a presentation by the Bankers Association of Malawi (BAM), which also proposes for the removal of VAT on cooking oil “to support vulnerable groups currently relying on unhealthy cooking oils”.

Another measure is to initiate tax policies that encourage savings and investments, such as tax deductions for interest earned on savings accounts or tax incentives for long-term investments.

BAM Chief Executive Officer, Lyness Nkungula further asked Minister of Finance & Economic Affairs, Simplex Chithyola Banda to also consider tax policies that encourage savings and investments — such as tax deductions for interest earned on savings accounts or tax incentives for long-term investments.

BAM suggests that the private sector need a tax model that encourages industry growth as currently taxes are prohibitive for a country such as Malawi.

“More industries means more tax collection,” said Nkungula in her presentation. “We need to expedite the taxation guidelines to simplify the Taxation Act and enhance understanding.”

Also suggested are tax incentives for digital banking through unstructured supplementary service data (USSD) that is used on basic handset phones, saying “accessibility for financial inclusion allows people to access financial services without needing to visit a physical bank branch.

She indicated that financial services “is particularly beneficial in rural and remote areas where banking facilities are scarce” adding that “cell phones have become a powerful tool in promoting financial inclusion, especially in regions where traditional banking infrastructure is limited”.

“Proposing tax breaks or incentives for banks that invest in digital banking infrastructure, can encourage the adoption of technology and improve access to banking services, especially in remote areas,” she said, while also asking government to recognise banks that have gone into productive sectors through tax reductions.

On containment of the country’s high inflation rate, government is advised that it needs to speed up mega-farms to contain food inflation: “Malawi has the ability to produce fertiliser and if this is done at a larger scale prices would go down and production would increase, thereby improving maize export.

“Farmers should be encouraged to use organic fertilizer — Lilongwe University of Agriculture & Natural Resources (LUANAR) could lead in this. This would significantly reduce foreign exchange spent on importing AIP fertilizer.”

To generate foreign exchange, the government is being asked to re-look into tax holidays of mining industries that is applied for by foreign investors, saying their taxes should be in US$ and not in kwacha.

Liquidity Reserve Requirement (LRR) needs to be revised, saying “lowering the LRR allows banks to leverage their capital more, increasing their capacity to lend to businesses and individuals”.

“This can stimulate economic growth by providing more funds for investment and consumption,” Nkungula said, whose organisation is also asking tax relief for small and medium enterprises (SMEs).

“Advocating for tax relief or incentives for SMEs will improve their access to credit. This can stimulate economic growth by supporting the backbone of the economy.”

BAM also suggests on streamlining export procedures “to enhance user-friendliness and minimise bureaucratic obstacles. Simplifying procedures and reducing unnecessary regulatory burdens will facilitate smoother and more efficient export activities, benefiting both businesses and the economy.”

BAM also touched on worrying trend of government expenditure, which other concerned economists have voiced against, saying expenditure control is very crucial for all government ministries departments and agencies (MDAs) to scrutinize their expenditure budget.

The association, whose mission is to promote a stable and inclusive financial system that supports economic growth, commends government on procurement for coming up with checks and balances — “but still the procurement is very expensive”.

The government is also asked to consider targeting vulnerable groups on social cash transfer with a focus on those in dire need to alleviate poverty and improve living standards.

When carrying out the social cash transfer, the government is being asked to be transparent by using clear selection criteria for beneficiaries to ensure fairness and prevent bias.

Other presentations, similar in nature that advocate for an investment budget, were made by Malawi Confederation of Chambers of Commerce and Industry (MCCCI), Institute of Chartered Accountants (ICA) while the floor was also given to other stakeholders.

In his closing remarks, the Minister of Finance said he was impressed with the level of participation at the Blantyre meeting, held at Sunbird Mount Soche, as well as the other two in Lilongwe and Mzuzu.

He assured that the contributions by the stakeholders — who are drivers of the country’s economy — would be consolidated in the 2025-2026 National Budget.

He applauded the stakeholders for being patriotic, participative and objective in their contribution, emphasising that his Ministry will continue to engage captains of the economy and all Malawians on issues of national economy.