Malawi Lowers 2025 Growth Forecast Amid Rising Inflation and Protests

Malawi’s government has revised its 2025 growth forecast down to 3.2% amid protests from street vendors and jobless youths dissatisfied with rising prices and inflation. Finance Minister Banda cited severe foreign exchange shortages as a contributing factor, stating intentions to boost production in key sectors. The current budget deficit is projected at 9.6% of GDP, with ongoing efforts to restructure national debt.

In a recent revision, the government of Malawi has reduced its economic growth forecast for 2025 in its annual budget, coinciding with widespread protests across major urban centers. Dismayed citizens, particularly street vendors, are voicing their grievances regarding the government’s inability to manage escalating prices and double-digit inflation, which they argue threatens their livelihoods. The unrest has extended from the capital, Lilongwe, to Blantyre, fueled by discontent among jobless youth dissatisfied with President Lazarus Chakwera’s administration.

During his budget presentation, Finance Minister Simplex Chithyola Banda announced that the anticipated growth rate would be lowered to 3.2%, down from the previous estimate of 4.0% made in December. This follows a challenging growth year in which the economy only managed a 1.8% increase, primarily due to the lingering effects of a severe drought that adversely affected agricultural productivity, a crucial sector in Malawi.

As of January, inflation reached an alarming 28.5% year on year, exacerbated by severe foreign exchange shortages that have hindered the importation of essential commodities, such as fuel and fertilizers. The lack of currency has also led to the emergence of an illegal black market for foreign exchange. To mitigate these issues, Minister Banda indicated plans to enhance domestic production in key areas, including agriculture, tourism, and mining.

To combat the illegal currency market, the government intends to establish a national anti-crime unit. The projected budget deficit for the current fiscal year stands at 9.6% of GDP, with an estimated slight reduction to 9.5% for the following year. Public debt is reported to be approximately 86% of GDP as of September 2024, with the government actively pursuing debt-restructuring negotiations to provide some relief.

Banda stated, “Government in principle has reached agreements with all official bilateral creditors and is still negotiating with commercial creditors to restructure debt.” He suggested that successful negotiations would alleviate pressure on foreign exchange and create necessary fiscal space for productive investments.

In summary, Malawi’s government has lowered its growth forecast for 2025 amid significant public protests over inflation and economic hardship. The Finance Minister outlines strategies aimed at addressing foreign exchange shortages and restructuring public debt to improve the nation’s economic condition. The government’s ability to navigate these challenges will be critical for restoring citizen confidence and fostering sustainable growth.

Original Source: www.straitstimes.com