Economic experts have given mixed reactions to the new taxes and levies announced by Government in the 2025–26 Mid-Year Budget Review, warning that the measures could help stabilise the budget but may also hurt businesses, households and investor confidence if not carefully implemented.
Financial analyst Dumbani Mzale said the decision to raise Value Added Tax (VAT) from 16.5 to 17.5 percent must be assessed in relation to the region.
In an interview with Nthanda Times, Mzale warned that if Malawi’s VAT becomes higher than that of neighboring countries, the country could lose its competitiveness.
“Malawi’s VAT has been static for some time, but we must ask where we stand compared to the region. If our VAT is higher than neighboring economies, it becomes a negative signal because it can automatically push investors away,” he added.
Mzale added that while some of the new tax measures show creativity, especially as Government tries to reduce expensive domestic borrowing, they require careful handling.
“There is always going to be a trade-off. We commend Government for thinking outside the box, but if these taxes are not executed with precision, Malawi risks chasing away investors and slowing down economic activity,” he added.
Another economic commentator, Edwan Leman, said the new taxes will “certainly affect households and businesses,” but noted that Government may have had limited choices due to the country’s weak fiscal position.
“With public debt almost equal to GDP and very little non-tax revenue, the fiscal space is extremely narrow. Government is compelled to look for immediate revenue, but these measures will put additional pressure on consumers and firms,” he said.
Leman said the timing reflects the economic reality Malawi is facing.
He added that while digital and service sectors have grown, higher transaction charges could push people away from electronic payments.
“Digital payments are efficient and transparent, but if the taxes become too burdensome, consumers may shift back to cash and informal systems. That would weaken the very revenue mobilization the Government is trying to strengthen,” he said.
In the Mid-Year Budget Review, government announced a 0.05 percent levy on all bank transfers, a 0.05 percent levy on mobile money transfers above K100,000, an increase in VAT to 17.5 percent, removal of tax thresholds on gambling winnings, a 0.5 percent Minimum Alternative Tax for large businesses, a new 40 percent PAYE bracket, a 20 percent surcharge on cement imports, and a 2 percent levy on motor vehicle insurance.
As Parliament prepares to debate the measures, experts say the impact of these new taxes will depend heavily on how carefully and transparently they are implemented.