Budget deficit widens by 30%

As debt-to-GDP ratio hits 69%

betchani tchereni,

The government will continue to spend beyond its means evidenced by a 30 percent rise in budget deficit for the 2023-24 financial year.

Presenting the National Budget Statement to Parliament Thursday, Minister of Finance and Economic Affairs Sosten Gwengwe said the overall fiscal balance is estimated at a deficit of K1.32 trillion, which is 8.7 percent of gross domestic product (GDP).

It represents a 30 percent jump compared to a K1.01 trillion projected deficit in the 2022-23 budget.


The deficit will be financed through foreign borrowing amounting to K288.78 billion and domestic borrowing amounting to K1.19 trillion, according to Gwengwe.

Figures he presented show that total public debt reached K7.90 trillion or 69.93 percent of GDP.

Out of this stock, K4.43 trillion is domestic debt while K3.47 trillion is external debt.


Compared to end-March 2022, total public debt stock amounted to K6.38 trillion, representing an increase of 23.8 percent; mostly out of issuance of Treasury securities to finance budget deficits and refinancing of old maturing debts.

The estimated likely outturn is higher than the approved deficit of K884.04 billion.

The increase in deficit was mainly on account of higher than planned salary adjustment, public debt interest, pensions and gratuities and other critical expenditure needs.

Malawi University of Business and Applied Sciences-based economist Betchani Tchereni said the debt levels are becoming unsustainable.

“At 69 percent of GDP, the public debt is high. If we can have much of the debt going towards investments, that will be fine.

“But it is obvious that the bigger chuck of this debt is from domestic sources, which basically implies that it is for recurrent expenditures. This is concerning also, especially when we note that interest payments are neck and neck with the budget on salaries,” Tchereni said.

A recent Malawi Economic Monitor published by the World Bank noted that domestic government debt uptake by the banking sector remains high, crowding out resources for private sector investment.

It further says, with the government still recording high fiscal deficits, uptake of domestic debt to finance the gap is still rising.

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