‘If economic growth targets of 3.2%-4.8% are to be achieved, government needs to contain appetite for debts and over spending’

* As Standard Bank Plc sees hope for Malawi through the 2024-2025 National Budget

* Success of implementation of this budget, and Malawi’s economic recovery, will hinge on the boldness, courage and commitment by all stakeholders

By Duncan Mlanjira

Finance & Economic Affairs Minister Simplex Chithyola has his work cut out for him — he must reduce government’s borrowing appetite and reign in expenditure controls if the ambitious economic growth targets of 3.2%-4.8% are to be achieved by 2025.


This is the advice from the country’s second largest bank, Standard Bank Plc in a statement officially responding to the Finance Minister’s draft 2024/25 budget statement he presented in Parliament on Friday.

Chief Executive Phillip Madinga said adherence to austerity measures and reducing public debt levels hold the keys to achieving the ambitious growth targets as set out in the government’s latest fiscal plan.

“Success of implementation of this budget, and Malawi’s economic recovery, will hinge on the boldness, courage and commitment by all stakeholders — thus private sector supporting initiatives that drive production and export generation, and on the government side, adherence to its austerity measures, reducing public debt levels and effective fiscal management and discipline,” Madinga said.

He also pointed out that the public debt interest line — which has increased by 3% of the total expenditure — must be closely monitored to ensure it remains within budget.

On the positive side, Madinga noted that the 2024/25 budget demonstrates government’s commitment to contain public debt growth as overall stock of K1.4 trillion represents a reduction by 14% and 7% as a proportion of revenue and expenditure lines, respectively.

Standard Bank Chief Executive Phillip Madinga

“The overall public debt growth at K1.4 trillion as a share of total revenues and total expenditure, has reduced by 14% and 7%, respectively, year on year.

“With the positive outlook on the macros, public debt growth is expected to be contained. This will be a significant step towards achieving debt sustainability.”

The Standard Bank chief said the 2024/25 budget also addresses the need to boost foreign currency supply by proposing export strategies through mega farms, labour export, mining, tourism and enhancement of diaspora remittances.

He added that based on the enhancement of revenue collection professes, anticipated donor inflow opportunities, rationalization of expenditures and additional focus on production sector, the 2024/25 budget gives hope to a better Malawi on the road to achieving the MW2063 vision.

In his budget presentation, Finance Minister Chithyola Banda acknowledged that Malawi’s public debt is unsustainable — just as many economic analysts, including the country’s development partners have always highlighted this shortfall.

Development partners were present during Chithyola Banda’s presentation

Chithyola Banda said “the Government has been working to sustain debt through fiscal adjustment and debt restructuring negotiations with its bilateral and commercial creditors”.

“The Government remains optimistic that the talks will yield the desired results. As of December 2023, public debt stood at K12.56 trillion, representing 84.8% of GDP, of which total external debt reached K6.62 trillion, while domestic debt amounted to K5.94 trillion.

“The exchange rate realignment has exacerbated the external debt component. Aware of the risks posed by contingent liabilities that lead to the growth of debt, such as guarantees, the Government is developing a framework for managing contingent liabilities.

“This would ensure that decisions to issue guarantees are made with a sound analytical underpinning.”

2023/2024 Budget Performance

In this financial year, the Minister projected that total revenue, including grants, is estimated to close at K2.99 trillion, representing 19.7% of GDP while domestic revenue is expected to reach K2.41 trillion, of which tax revenue is estimated at K2.20 trillion, and K209.34 billion is other revenue.

“Improving domestic revenue mobilization is key to addressing the Government’s spending needs. The government will, therefore, continue implementing the Domestic Resource Mobilisation Strategy (DRMS 2021-2026) to broaden the tax base and improve tax compliance.

On the expenditure side, he said for the 2023/2024 fiscal year it is projected at K4.35 trillion, representing 28.6% of GDP and that the expenditure comprises K3.31 trillion in recurrent expenditure and K1.04 trillion in development expenditure.

The development expenditure comprises K361.02 billion from domestic resources and K682.41 billion from foreign resources while the recurrent expenditure comprises K1.03 trillion for compensation of employees with K647.32 billion for use of goods and services

About K931.48 billion is expenditure for interest payment; K327.49 billion for grants to other general Government units; K297.73 billion for social benefits; and K73.69 billion for other expenses.


Fiscal Balance

Based on the preliminary outturn of revenue and expenditure in the 2023/2024 fiscal year, the overall deficit is estimated at K1.36 trillion, representing 8.9% of the country’s GDP.

The deficit is projected to be financed through domestic borrowing, amounting to K1.23 trillion, while the rest of the resources will come from foreign borrowing.

Economic Growth

The Minister said Malawi’s economic performance slowed down in 2023 to 1.5% from an earlier estimate of 1.9%, attributing to the slowdown due to several factors such as foreign exchange shortages — which disrupted the supply of strategic commodities, including fuel and fertilizer.

He thus said the 2024 and 2025, economic prospects remain optimistic as the economy is expected to grow by 3.2% and 4.8%, respectively, adding that the projected “superior performance is attributed to large-scale mega-farm output and anticipated high growth in construction, manufacturing, information and communication, and accommodation and food services.


The Minister said inflation “continues to negatively affect the disposable incomes of Malawians, as evidenced by the continued increase in prices of commodities”.

“In 2022, annual average inflation stood at 20.9% and increased to 28.8% in 2023. The high inflation is mainly attributed to an increase in food prices. As of December 2023, food inflation was 43.5% compared to 31.3% for the same month in 2022.

“Similarly, non-food inflation rose to 22.8% in December 2023 from 18.6% in December 2022. Annual average inflation is expected to improve in 2024 and 2025 to 27.1% and 12.4%, respectively.

Monetary Policy

Chithyola Banda pledged that the Government “remains committed to implementing an appropriate monetary policy to contain inflationary pressures [and] in this regard, the Reserve Bank of Malawi (RBM) adjusted the policy rate from 24.0% to 26.0% in January 2024”.

“The RBM will continue to monitor and stabilize short-term interest rates to align with the policy rate adjustment. With the positive inflation outlook, the policy rate is expected to follow a downward trajectory.

The Reserve Bank of Malawi

Foreign Exchange Reserves

“The country has been experiencing a decline in foreign exchange reserves during the year 2023. However, the economy’s foreign exchange reserves improved to 2.7 months of import cover towards the end of December 2023.

“To increase foreign exchange reserves, the RBM will continue to implement the surrender requirement of 30% of exports and monitor the performance of the Malawi Kwacha against major trading currencies.”

With these measures, Chithyola Banda assured the august House that the economy’s official reserves are expected to improve over the medium term.

Extended Credit Facility (ECF)

The Government secured a four-year extended credit facility (ECF) arrangement from the International Monetary Fund (IMF) amounting to US$175 million, whose first tranche of US$35 million was disbursed immediately upon approval in November 2023.

The Minister said the ECF “has unlocked financial resources from development partners such as the World Bank, the European Union, and the African Development Bank”

“Overall, the ECF will support the Government’s macroeconomic adjustment and reform agenda to restore macroeconomic stability and build a foundation for inclusive and sustainable growth.

“The government will continue to monitor macroeconomic developments to ensure the IMF program remains on track,” said the Minister.