Budget puzzle

In the circumstances, the family constantly lacks food, some of the children do not go to school due to lack of fees and there is no money to meet medical bills. While most of their neighbours own the homes they live in, his family is renting and six months behind in rental payments. Where does the money daddy borrows go?

The first suspicion is that he is living a double life and probably has a second family somewhere. Given the man’s sweet tooth for high life he can hardly afford, that is probably a plausible explanation. But, as The Nation has discovered, that is just a fraction of the truth.

Apparently, the man, a Mr. Malawi Government, has been borrowing largely to pay off loans contracted over the past decade, mostly interests on principal in a vicious cycle that has left his finances stressed up all the time and his family in perpetual deprivation. It is the reality of the indebtedness the Malawi Government is in: Debt financed consumption for survival—borrow to pay some of the most pressing loans falling due, ensure civil servants get their wages and salaries; bring in fuel, fertiliser and so-called strategic imports, which are consumptive while long-term infrastructure that is actually the catalyst for growth and a way to wiggle out of the debt trap, get crumbs.

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Malawi’s total public debt stock now stands at K22.4 trillion or 89 percent of its gross domestic product (GDP) from K4.76 trillion or 54 percent of GDP in 2020 amid rising deficits. In the current financial year ending March 31 2026, the deficit is projected at 9.5 percent of GDP primarily financed by domestic borrowing. The debt-to-GDP ratio surged from 54 percent in 2020 to around 73 percent in 2022, roughly 82 percent in 2023 and hovered around 89 percent from 2024/25.

Treasury data show that between 2020 and 2025, the bulk of the borrowed money has been spent on recurrent expenditures such as debt servicing and salaries rather than developmental or capital spending. In the 2025/26 National Budget, just 10 percent of total expenditure went to capital formation and other operations with wages and debt servicing swallowing 90 percent of the budget, thereby squeezing capital expenditure and limiting government’s ability to finance long-term growth. In the past five years, borrowing has steadily moved away from expanding development capacity towards financing widening fiscal gaps.

Debt repayments alone have surged from roughly K300 billion in 2021/22 to a projected K2.47 trillion in 2025/26, an eightfold increase that now consumes an increasingly large share of government revenue and total expenditure. The trend points to a structural transition: Malawi is borrowing less to build and more to survive.

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