Mixed expectations ahead of 2026-27 budget tabling

Min­is­ter of Fin­ance, Eco­nomic Plan­ning and Decent­ral­isa­tion Joseph Mwanam­vekha will on Fri­day present the 2026-27 national budget to Par­lia­ment. The budget comes months after the gov­ern­ment launched the National Eco­nomic Recov­ery Plan (NERP), a blue­print aimed at sta­bil­ising the eco­nomy, restor­ing con­fid­ence and accel­er­at­ing inclus­ive growth. Key assump­tions anchor­ing the cur­rent budget are largely off­bal­ance. Malawi’s pro­jec­ted gross domestic product (GDP) growth for 2025 was revised slightly down­ward from 2.8 per­cent in May to 2.7 per­cent in Novem­ber 2025, reflect­ing fra­gil­ity of the eco­nomy.

However, the gov­ern­ment remains upbeat on the recov­ery tra­ject­ory, eye­ing a GDP growth rate of 3.8 per­cent in 2026 and 4.9 per­cent in 2027.

The ques­tion ana­lysts are ask­ing is whether these tar­gets are attain­able, given per­sist­ent forex short­ages, high bor­row­ing costs and sub­dued private sec­tor expan­sion. Head­line infla­tion aver­aged 28.5 per­cent in 2025, and is pro­jec­ted to go fur­ther down to an aver­age of 21 per­cent in 2026. The gov­ern­ment affirmed com­mit­ment to bring­ing down the infla­tion to 21 per­cent this year, but this will largely depend on food sup­ply sta­bil­ity, exchange rate man­age­ment and fiscal dis­cip­line.

For house­holds, where a fam­ily of six now requires over K1 mil­lion per month to meet basic needs, accord­ing to recent cost-ofliv­ing estim­ates, the cred­ib­il­ity of infla­tion assump­tions will be cent­ral to judging the new budget. The 2025-26 total budget was revised upwards by K512.6 bil­lion to K8.589 tril­lion from K8.077 tril­lion. The gov­ern­ment pro­jec­ted to gen­er­ate K3.078 tril­lion in rev­enue and grants dur­ing the second half of the fin­an­cial year, com­pris­ing K2.420 tril­lion in domestic rev­enue and K657.5 bil­lion in grants.

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However, in the first two months of the second half, rev­enue col­lec­tion was below K1 tril­lion com­bined, rais­ing con­cerns about whether tar­gets would be met without increased bor­row­ing.

For instance, in Octo­ber 2025, the gov­ern­ment recor­ded rev­en­ues of K566.7 bil­lion against expendit­ures of K577.5 bil­lion, res­ult­ing in a rel­at­ively mod­est K10.8 bil­lion defi­cit, a sharp improve­ment from Septem­ber’s K327.4 bil­lion defi­cit. In Novem­ber 2025, however, rev­enue of K422.1 bil­lion against expendit­ure of K498.5 bil­lion widened the defi­cit to K76.4 bil­lion.

Although these fig­ures rep­res­ent yearon-year improve­ment com­pared to 2024 levels, they high­light the fra­gil­ity of rev­enue per­form­ance. If rev­enue pro­jec­tions fall short again in 2026-27, Treas­ury may face increased domestic bor­row­ing pres­sure. Bey­ond recov­ery, atten­tion is also on debt sus­tain­ab­il­ity, as total pub­lic debt stood at K22.4 tril­lion as of Septem­ber 2025, with domestic debt account­ing for more than 55 per­cent of the total stock. Interest pay­ment oblig­a­tions alone are pro­jec­ted at K2.27 tril­lion in the 2025-26 fiscal year.

The Treas­ury has already begun efforts to reduce domestic bor­row­ing, reflec­ted in recent gov­ern­ment secur­it­ies auc­tions by the Reserve Bank of Malawi, where author­it­ies have rejec­ted most of the expens­ive long-term Treas­ury bill offers since Janu­ary. Total rejec­tions have since amoun­ted to over K500 bil­lion since Janu­ary 2026 .

Still, rising expendit­ure com­mit­ments, includ­ing free sec­ond­ary school edu­ca­tion and K5 bil­lion per con­stitu­ency under the Con­stitu­ency Devel­op­ment Fund, will add pres­sure to an already stretched fiscal frame­work. Eco­nom­ist Mar­vin Banda said interest pay­ments, the wage bill and pen­sions con­tin­ued to con­sume a sig­ni­fic­ant por­tion of expendit­ure, lim­it­ing fiscal space for devel­op­ment spend­ing.

“What is crit­ical is whether devel­op­ment expendit­ure reaches at least 30 per­cent, which is the min­imum required gain­ing trac­tion toward national aspir­a­tions,” Banda said.  National Small and Medium Enter­prises National Coordin­ator Wil­liam Mwale has also urged the gov­ern­ment to increase the oper­a­tional budget for the Min­istry of Industry and Trade to strengthen SME devel­op­ment mon­it­or­ing across the coun­try. “We would like to see the inclu­sion of SME indus­trial shel­ters in all regions. Most man­u­fac­tur­ing SMEs oper­ate from homes because indus­trial sites the gov­ern­ment prom­ised years ago are yet to mater­i­al­ise,” Mwale said. In his State of the Nation Address, Pres­id­ent Peter Mutharika out­lined aus­ter­ity meas­ures tar­get­ing pub­lic expendit­ure and bene­fits for senior offi­cials, along­side meas­ures to boost forex gen­er­a­tion. Now the real test comes on Fri­day when Mwanam­vekha out­lines policies and alloc­a­tions aimed at sta­bil­ising the eco­nomy while set­ting the found­a­tion for recov­ery.