Stability first, income gains later — CfSC

The Centre for Social Concern (CfSC) says the 2026/27 fiscal plan prioritises stabilisation and growth foundations rather than immediate income expansion. Reacting to the 2026/27 Budget Statement, CfSC economic governance officer Agnes Nyirongo observes that the 2026/27 National Budget, anchored on the newly-unveiled National Economic Recovery Plan (Nerp), signals a government intent on restoring macroeconomic stability while laying foundations for long-term growth. However, she said, the plan may not dramatically increase disposable incomes in the short term, but if inflation declines as projected and productive sectors deliver jobs, the benefits could become more tangible over time.

Nyirongo said for low wage earners, hope lies more in stabilisation and structural reforms than in immediate income gains. She said: “Stability is a prerequisite for prosperity. There are tangible benefits; lower maize prices, free education and improved pension payments directly ease financial burdens while fiscal consolidation appears to be moderating inflationary pressures, which, if sustained, will protect real incomes.

“Inflation, which has eroded household purchasing power since 2021, is projected to decline from 28.5 percent in 2025 to 15 percent by the end of the 2026/27 financial year. If achieved, this would mark a significant improvement in price stability and consumer welfare.” She, however, said the budget narrative does not indicate broad-based wage adjustments, significant tax relief for low-income earners or expanded direct social protection measures, adding that with public debt consuming substantial resources, there is limited fiscal room for expansive consumer-focused interventions. The budget is built on a fiscalised GDP growth projection of 4.1 percent, an end-period inflation target of 15 percent, nominal GDP of K31.5 trillion and a policy rate of 18 percent.

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These assumptions come against a backdrop of inflation that stood at 28.5 percent in 2025 and broad money growth of 44.9 percent as public debt remains elevated at K23.9 trillion, equivalent to 90.9 percent of GDP, with debt servicing now approaching K2.5 trillion annually. Of the total K10.978 trillion expenditure, K7.581 trillion has been projected for recurrent spending, where statutory obligations remain dominant as wages and salaries are projected at K1.923 trillion while public debt interest is projected at K2.793 trillion. On his part, Consumers Association of Malawi executive director John Kapito said while the middle income earners will benefit more from macro stability, the benefits could be offset by payments made on taxes and service costs as low income household gains will come from food subsidies, cash transfers and maize price control.

“Fiscal consolidation and austerity mean the government is cutting public spending and limiting recruitment, which could slow wage growth, cause some job losses and reduce overall demand in the short-term,” he said. In his 2026/27 Budget Statement, Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamvekha said the budget, which lays a foundation for inclusive and resilient growth, is people-centered, pro-poor, developmental and transformative.

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