Malawi Adjusts 2025 Growth Forecast Amid Rising Inflation and Protests

Malawi’s government has lowered its 2025 economic growth forecast to 3.2% due to rising inflation, prompting protests from mainly street vendors. The inflation rate is currently at 28.5%, with a focus on addressing forex shortages through production in agriculture, tourism, and mining. Debt negotiations are ongoing to ease fiscal constraints.

In Malawi, the government has revised its economic growth forecast for 2025 downward, following major protests in urban centers against rising prices. Protesters, primarily street vendors, have expressed their dissatisfaction with the government’s inability to manage double-digit inflation, claiming it threatens their livelihoods. As demonstrations spread from Lilongwe to Blantyre, jobless youths have joined in, voicing their discontent with President Lazarus Chakwera’s administration.

During a recent budget speech, Finance Minister Simplex Chithyola Banda announced that the economy’s growth is now projected at 3.2 percent for 2025, a decrease from 4.0 percent previously anticipated in December. The growth rate for the past year was only 1.8 percent due to severe drought conditions that negatively impacted agricultural productivity, a cornerstone of Malawi’s economy. Currently, inflation stands at 28.5 percent, exacerbated by foreign exchange shortages that hinder essential imports, leading to a burgeoning black market for foreign currency.

To alleviate foreign exchange shortages, the government aims to enhance production in key sectors such as agriculture, tourism, and mining. Furthermore, Minister Banda stated that a national anti-crime unit would be established to tackle the black market for currency. The fiscal year’s budget deficit is projected at 9.6 percent of GDP, with the next year’s estimate slightly lower at 9.5 percent of GDP.

Public debt currently hovers around 86 percent of GDP as the government seeks to finalize debt-restructuring negotiations. According to Minister Banda, “Government in principle has reached agreements with all official bilateral creditors and is still negotiating with commercial creditors to restructure debt.” Completing these negotiations could alleviate pressure on foreign exchange and create necessary fiscal space for productive investments.

In summary, Malawi’s government has revised its economic growth forecasts due to widespread public protests over inflation and rising costs. The Finance Minister outlined strategies to improve the economy amidst high inflation and increasing public debt. Addressing these economic challenges involves boosting key sectors and finalizing debt negotiations to enhance fiscal stability.

Original Source: www.thecitizen.co.tz