Minister of Finance and Economic Affairs, Simplex Chithyola Banda has on Friday presented the 2025/2026 national budget, unveiling a total expenditure of MWK8.05 trillion, an increase of MWK2.05 trillion from last year’s MWK6 trillion budget.
Presenting the budget on Friday at Parliament building in Lilongwe, Chithyola Banda said the proposed budget represents 31.1% of Malawi’s Gross Domestic Product (GDP), describing it as the government’s commitment to fund key development projects, social services, and economic reforms in the country.
Major highlights
One of the key highlights of the budget is the wages and salaries allocation, which is projected to grow to MWK1.53 trillion which includes MWK10 billion set aside for new recruitments and MWK176 billion reserved for general salary increments.
The increase according to Chithyola Banda aims to strengthen the public workforce while addressing wage concerns across government institutions.
The budget also provides MWK170.4 billion for pensions and gratuities to clear outstanding pension arrears and meet monthly pension obligations.
This allocation follows the government’s initiative to inject an additional MWK100 billion into pension payments, reducing the waiting period for retirees.
A portion of the budget, MWK2.17 trillion, has been allocated to public debt interest payments, which constitutes 8.4% of GDP and 49.2% of domestic revenues, underscoring the country’s high debt burden, which continues to impact public finances.
To support the agriculture sector, the government has allocated MWK131.6 billion to the Affordable Inputs Programme (AIP) to ensure access to subsidized farm inputs, aimed at improving food security and supporting smallholder farmers.
The budget has also set aside MWK162.9 billion for the Malawi Electoral Commission (MEC) to facilitate the 2025 tripartite elections. This represents a 207% increase from the previous year’s MWK53.1 billion.
Ministries with the largest and smallest allocations
The Ministry of Health and Population has received the largest budget allocation, totaling MWK741.05 billion, which accounts for 9.2% of the total national budget. These funds according to Chithyola Banda will be directed toward improving health infrastructure, procuring medical supplies, and strengthening healthcare service delivery.
Meanwhile, the Ministry of Trade and Industry has received the smallest allocation, at MWK14 billion. The funds will primarily support trade facilitation, industrialization efforts, and the promotion of small and medium enterprises (SMEs).
Budget deficit and financing
The budget deficit for the 2025/2026 financial year is estimated at MWK2.47 trillion, representing 9.5% of GDP.
To finance this gap, the government plans to borrow both domestically and externally.
Domestic borrowing will amount to MWK2.33 trillion, which makes up 9.0% of GDP, while foreign borrowing is projected at MWK145.78 billion.
Public debt
As of September 2024, Malawi’s total public debt stood at MWK16.19 trillion, accounting for 86.4% of GDP.
Of this amount, external debt was recorded at MWK7.39 trillion, while domestic debt amounted to MWK8.79 trillion.
The government has been engaging bilateral and commercial creditors in debt restructuring efforts to ease fiscal pressures and create space for economic recovery initiatives.
Public borrowing
Public borrowing for the 2025/26 fiscal year will be MWK2.47 trillion, with MWK2.33 trillion sourced domestically, while foreign borrowing will contribute MWK145.78 billion.
The government has reiterated its commitment to prioritizing concessional loans and innovative financing methods to reduce dependence on high-interest borrowing.
