Ecama backs budget direction, warns of risks

The Economics Association of Malawi (Ecama) says the 2026/27 National Budget signals a shift toward fiscal consolidation and productive investment, but warns that the approach carries risks in an economy constrained by high public debt, inflation and foreign exchange shortages. In its preliminary analysis of the budget shared by the association’s president Bertha Bangara-Chikadza, Ecama said the plan reflects what it described as a “consolidation-with-growth strategy”, combining deficit reduction with increased spending on sectors aligned with the Malawi 2063 development agenda. Presenting the budget in Parliament last Friday, Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamvekha said government expects the fiscal deficit to narrow from about 11.9 percent of GDP to 9 percent, while development spending will rise to about 30.9 percent of total expenditure.

“Overall, the budget reflects a consolidation-with-growth strategy,” Ecama said. However, economists cautioned that Malawi’s macroeconomic environment remains fragile. Public debt stands at roughly 91 percent of GDP, while persistent foreign exchange shortages and inflationary pressures continue to weigh on economic activity.

Ecama said the government’s macroeconomic assumptions—4.1 percent GDP growth and 15 percent inflation—are broadly achievable but remain vulnerable to shocks if external conditions worsen or fiscal discipline weakens. The association also warned that Malawi remains trapped in what it described as a “food–forex–inflation trilemma”, where foreign exchange shortages, rising food prices and inflation reinforce one another. On the revenue side, Ecama welcomed measures aimed at broadening the tax base, including taxation of digital services, stronger enforcement of rental income tax and automation of non-tax revenue collection.

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“These measures are commendable steps toward expanding the revenue base,” the association said, while cautioning that domestic revenue mobilisation has historically fallen short of targets. Given Malawi’s large debt burden, Ecama said government will need to maintain strict fiscal discipline to prevent domestic borrowing from crowding out private sector credit. The budget also signals a shift toward productive investment, with increased allocations to sectors such as agriculture, tourism, mining and manufacturing.

Planned initiatives include irrigation expansion, energy investments and development of special economic zones aimed at boosting export capacity. However, Ecama noted that allocations to some productive sectors remain modest relative to the scale of structural transformation required. Opposition leaders offered a sharper critique of the fiscal plan. Leader of Opposition Simplex Chithyola-Banda said the budget fails to address the economic pressures facing households, particularly the absence of tax relief for workers.

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