UNICEF Malawi's Budget Briefs 2024-2025

Highlights

Frequent shocks, including the recent El Nino-induced drought, are negatively impacting Malawi’s economic growth. Due to these weather-related shocks, the IMF has projected a GDP growth for Malawi of 2 per cent for 2024, which is lower than the 3.2 per cent initially projected by the Government of Malawi. Inflationary pressures remain strong – while the Government projected an annual inflation rate of 27.1 per cent for 2024, headline inflation reached 34.3 per cent as of September 2024, an increase from 33.9 per cent recorded in August 2024, as reported by the Reserve Bank of Malawi (RBM). 

The size of expenditure continues to outpace available revenue. For the 2024/25 budget, total government expenditure is projected at MK5.99 trillion (32 per cent of GDP) against projected revenues and grants of MK4.5 trillion (24 per cent of GDP). This translates into a budget deficit of MK1.4 trillion (7.7 per cent of GDP), which is lower than 9 per cent of GDP for 2023/24. In relation to GDP, expenditures have consistently increased from 20.5 percent in 2021/22 to 32 percent in 2024/25 higher than the growth in revenue from 12 per cent to 24 per cent.

Total public debt stock has reached MK13.9 trillion (86 per cent of GDP) as at end December 2023, up from MK9.4 trillion in 2022, due to fiscal and external deficits as well as depreciation. Between 2020/21 and 2024/25, fiscal deficits have averaged 8.5 per cent of GDP, contributing to surging debt servicing costs, with an allocated budget of MK1.5 trillion in 2024/25, accounting for 24.3 per cent of the total budget, and representing the largest budget item ahead of allocations to all other sectors, for the third consecutive fiscal year since 2022/23.

The proportion of total government spending on essential social services increased from 29.3 percent in 2023/24 to 31 per cent in 2024/25, education (14.7 per cent from 15.6 per cent) health (9.2 per cent from 8.7 per cent), WASH (3.4 per cent from 1.4 per cent), and social protection (3.7 per cent from 3 per cent).

Against this background, UNICEF encourages the Government to stay on course with the Extended Credit Facility (ECF) arrangement with the International Monetary Fund (IMF) to restore macro-economic stability and contain the growth of domestic borrowing, including by enforcing fiscal discipline, expediting public financial management (PFM) reforms, and completing the external debt restructuring process.

In addition, Government is encouraged to sustain the increase in allocations towards social sectors, while ensuring actual and timely disbursement of allocated budgets, to ensure quality service delivery to poor and vulnerable persons including children, especially amidst the frequent shocks facing the country.