Tax experts have urged the newly elected Peter Mutharika administration to implement comprehensive reforms to boost domestic revenue collection, warning that continued reliance on aid and borrowing threatens economic stability.
The calls come as the International Monetary Fund painted a grim picture of Malawi’s fiscal situation, with the overall deficit standing at 10.1 percent of GDP in the fiscal year 2024/25 due to lower-than- projected revenues, election-related spending and an increasing interest bill.
In an interview Tuesday, tax expert Emmanuel Kaluluma said Malawi has enough tax incentives to attract foreign direct investment, but investors look beyond tax legislation when deciding where to invest.
He emphasised the need for officials to resist corruption and for intensified taxpayer education, arguing that the government should clearly illustrate how tax revenues are used.
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“Investors look at infrastructure which can reduce the cost of both inbound and outbound goods. In addition, as a country, time has come to accept that investors advocate for free movement of goods and services especially when it comes to earnings. On the world ranking we are found to be too slow leading to inefficiency.
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“Politicians from the top should join in taxpayer education efforts and compliance practice. They should be the first to pay taxes. Malawi should at all cost enforce tax laws without having sacred cows, being in politics does not mean exemption from paying tax on business income a politician earns,” Kaluluma said.
He said in countries where compliance is low, governments rely on value-added tax, but both direct and indirect taxes should be administered to lead to reduction of tax rates.
Economist Velli Nyirongo stressed the importance of broadening Malawi’s tax base to secure stable revenue for essential public services and economic growth.
He proposed formalising small and medium enterprises through simplified registration and payment systems, expanding value-added tax coverage sensibly, and improving property and local tax collection.
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“A narrow tax base limits the government’s ability to fund health, education and infrastructure, forcing reliance on aid and borrowing. Broadening the base does not mean higher tax rates, but ensuring that more sectors and individuals contribute fairly.
“Taxing digital services and large informal traders can also bring new sources of revenue without burdening the poorest. In the short term, the government should focus on low-hanging fruits. Better compliance among large taxpayers, tighter control of VAT collections, and removing unnecessary exemptions could quickly increase revenue,” Nyirongo said.
However, he warned against over-taxation, arguing that it can discourage investment and weaken the private sector, ultimately reducing the tax base.
The IMF Executive Board, which concluded its 2025 Article IV consultation with Malawi in July, stressed that fiscal consolidation focused on domestic revenue generation is essential to reduce inflationary pressures and improve debt sustainability.
The international lender urged tax policy and revenue administration reforms to broaden the tax base, while containing the interest and wage bills and rebalancing expenditures toward infrastructure, human capital investment and social protection.
The IMF noted that public debt dynamics remain unsustainable, with total public debt reaching 88 percent of GDP by the end of 2024, while the interest bill on public debt is estimated to be approaching seven percent of GDP.
