Malawi has revised its 2025 economic growth forecast downward as inflation concerns spark protests across major cities.
Finance Minister Simplex Chithyola Banda announced in the annual budget that the economy is now expected to grow by 3.2% this year, down from the 4.0% projection made in December. Last year’s growth stood at 1.8%, impacted by a severe drought that reduced agricultural output, the backbone of Malawi’s economy.
The country is grappling with high inflation, recorded at 28.5% in January, driven by foreign exchange shortages that have disrupted imports of essential goods like fuel and fertilizer. A black market for foreign currency has flourished as a result.
Public frustration over the economic crisis has led to protests, initially led by street vendors but now joined by unemployed youths. Demonstrators accuse President Lazarus Chakwera’s government of failing to curb inflation, which they say is pushing them out of business. The protests, which began in the capital Lilongwe, have spread to the commercial hub of Blantyre.
In response to the forex crisis, Banda said the government plans to boost production in key sectors like agriculture, tourism, and mining to generate more foreign revenue. Additionally, a national anti-crime unit will be established to tackle illegal currency trading.
The country’s budget deficit is estimated at 9.6% of GDP for the current fiscal year and is expected to be 9.5% next year. Public debt remains high at around 86% of GDP as of September 2024. Banda stated that the government has reached agreements with bilateral creditors and is still in negotiations with commercial lenders for debt restructuring.
“Once negotiations are completed, this initiative will help ease forex pressures and create fiscal space for productive investments,” he said.