By Kingsley Jassi:
The International Monetary Fund (IMF)’s decision to slash Malawi’s growth rate to 2.4 percent from an earlier projected 3.2 percent will worsen fiscal pressure and potentially fuel more domestic borrowing, economists have warned.
According to the IMF, Malawi’s economy is in distress, ravaged by high inflation projected to average 29 percent and unsustainable public debt that demands slower domestic borrowing and debt restructuring with foreign commercial lenders.
Reacting to the IMF’s Article IV consultations statement, Malawi Economic Justice Network (MEJN) Executive Director Bertha Phiri said the government needed to be realistic in making projections that form the basis for fiscal frameworks.
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She explained that unrealistic projections create false expectations that can lead to the misallocation of resources and investment decisions, ultimately undermining long-term economic stability.
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“If growth projections are overly optimistic, it leads to increased demand without a corresponding increase in supply, resulting in inflation. All these affect implementation of the budget.
‘The government needs to go back to the drawing board during the mid-year budget review and re-compute realistic economic growth projections and related macro factors,” Phiri said.
The Reserve Bank of Malawi recently admitted, during a monetary policy technical forum, that consultations were underway to develop new economic projections, responding to doubts about growth and inflation outlook.
Several economists and think tanks, including the Economics Association of Malawi, have raised concern over official economic projections that are underpinning the K8 trillion national budget, warning of possible fiscal slippages that may fuel further instability.
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The national budget was based on 3.2 percent economic growth and 27 percent inflation outlook, both of which have been revised downward.
While growth projections affect domestic revenue collections, inflation affects expenditure, driving growth in domestic borrowing in recent years.
Treasury officials were not available a for comment but the government’s position centres on implementing a homegrown economic plan beginning with adherence to the 2025-26 national budget to achieve stability.The IMF has called for domestic revenue mobilisation to achieve fiscal sustainability in an equitable way, urging a combination of broadening the tax base and improving tax policy instruments while enhancing wage bill efficiency and rebalancing expenditures toward human capital and social protection.
